Downstream News September 2023
Welcome to our new look Downstream News!
We are pleased to be launching our quarterly newsletter. We’ve been very busy over at Flood Re HQ, and have some exciting updates below including the recent launch of our newest Transition Plan. A big part of our exit from the market in 2039 is to get everyone ready for a world without Flood Re so we are focusing on how best to make that happen.
I hope you enjoy reading our updates – feel free to share with your colleagues and should you have any questions the team and I would love to hear from you at events@floodre.co.uk
Andy Bord – CEO Flood Re
Annual Report and Accounts
We published our annual report which can be viewed on our website here: Reports – Flood Re
Flood Re QQR and Eligibility
Flood Re’s Second Statutory Review (“QQR2”)
The first statutory review of the Flood Re Scheme was published in July 2019 and its recommended changes became effective from April 2022. They included a change to both the amount of and the setting of our Levy and Liability Limit. We were also granted permission to offer Build Back Better. In preparing for the next review (due to be published in July 2024) we are keen to engage with insurers and hear their views on Scheme developments. We are hosting a QQR Workshop on 12 October 2023 and a further session in January 2024, to explore recommendations for change. In parallel, this September, we will be hearing from relevant insurers about their experiences of Build Back Better to date.
Flood Re eligibility: Holiday Homes and Second Homes
The Flood Re Excess of Loss Reinsurance Treaty is clear that holiday homes and second homes are only eligible to the extent that they meet the wider Scheme criteria including that they are:
- Built before 2009
- Lived in by the policyholder or family members OR are unoccupied
- Are not buy to let
- Are covered by a Standard Home Insurance Policy
Second homes which do not meet the criteria in Treaty Schedule 2, including buy to let properties, are not eligible.
In the first year of the Scheme’s operation, we were approached about an occasional, short term let of a local home for the Wimbledon fortnight. Two similar examples included for the Open Golf and the Edinburgh Festival. In each case, the property in question was the policyholder’s home, insured under a standard home insurance policy and the insurers in question were prepared to accept the change in conditions for the short, relevant period. To ensure fairness to cedants, Flood Re issued guidance to all insurers in 2017 which included the following section:
“Insureds may occasionally rent out their entire home or part of it for short periods, such as a few days or weeks in accordance with the terms of their Home Insurance Policy and those properties can be ceded subject to meeting all other requirements. Flood Re requires insurers to meet all of the eligibility requirements, in good faith. The Scheme is designed to assist homeowners most at risk of flooding, not businesses or properties being rented out for commercial gain. Flood Re’s own reinsurance is based on the same eligibility criteria so it is important that only eligible risks are ceded to us.”
This summer, Flood Re reminded insurers at the ABI’s Property Steering Group that Flood Re and its retrocessionaires would not expect that insurance policies designed to cover homes being rented out to paying guests (including those homes actively listed on holiday accommodation rental sites) would meet the requirements of the Scheme or the T&Cs of a standard home insurance policy. Instead, such policies typically include cover against liabilities associated with paying guests, loss of rent clauses, late cancellation indemnification and so on.
Since its inception, Flood Re has consistently declined claims where the property in question had been rented out for gain and did not meet the eligibility requirements during the relevant policy period.
Flood Re’s insurer audit process considers an insurer’s controls to ensure compliance with the eligibility criteria for holiday and second homes.
Should second-home / holiday home owners wish to continue to benefit from the Scheme’s subsidised premium they should only use the property for themselves or their family, rather than operating it for commercial gain. If they wish to continue to rent out the property on a more than an occasional, short term basis, in line with the terms of their standard home insurance policy, then their policy will not longer be eligible for Flood Re.
You can find the Flood Re Eligibility Criteria at the following link: Eligibility criteria – Flood Re and we will be hosting a webinar on eligibility for participants before the end of 2023. Keep an eye out for details of the date and time.
Build Back Better
The Build Back Better (BBB) initiative went live 1 April 2022. BBB allows the reimbursement of claim costs to a maximum of £10k incurred per claim if making a home more resilient or resistant after flooding. 76.5% of the UK market is now committed to offer BBB to policyholders!
BBB can make a positive difference to those households that experience the trauma of a flooded home, and still remain at risk of future flooding. We have received notification, and paid out, the first BBB claims covering Property Flood Resilience (PFR) measures and flood surveys. As we grow a data set we will begin sharing BBB case studies and PFR insights to cultivate BBB and PFR market knowledge.
With the new Consumer Duty in mind, participants not yet onboarded are urged to consider their BBB proposition. Please contact the Flood Re team for information and support. We will continue working with already onboarded participants on opportunities to further grow their BBB offering. The market goal is for BBB to be a ‘normal’ part of home insurance coverage.
We were thrilled to celebrate the one year anniversary of Build Back Better this Spring and have been very busy developing a toolkit to help everyone better understand this proposition.
To help everyone understand the principles of BBB we have turned them into a handy animation which can be viewed here: Build Back Better Animation.
You can explore a house fitted with PFR measures via an interactive video which is hosted on our Be Flood Smart hub page here: Be Flood Smart.
Earlier this year we hosted an informative day in the interests of BBB and PFR education. We are currently arranging for more of these to be hosted later this year but in the meantime we will be hosting online lunch and learn sessions to access the same information. Come along to our first session scheduled for October 19, we’ll be running these on the 3rd Thursday of every month, sign up here: BBB & PFR lunch and learn.
Updates from our Operations Team
System Transformation Update
Flood Re have invested in new insurer-facing systems for both our Property Data Hub tool and our Bordereaux Management System. The introduction of these new systems marks a new operating phase at Flood Re and allows us to better serve out stakeholders while achieving our longer-term goals.
We would like to thank you for your patience while we continue to embed and evolve these new processes and systems.
BMS
We understand that there have been some challenges and your feedback has played a crucial role in informing our continuous improvement pipeline. We will be undergoing a system upgrade on the 29 September and then will continue to address any remaining issues after that date.
We would like to remind everyone that we have a comprehensive suite of training materials and videos available here: Industry – Flood Re
Obligation for monthly submission of underwriting and claims bordereaux
We would like to take the opportunity to remind all cedants and their agents, that the Flood Re Treaty expressly and clearly requires timely, monthly, submission of both claims and underwriting bordereaux. This requirement reflects Flood Re’s own obligations for both internal planning and reserving and external reporting to retrocessionaires. Flood Re’s new system reporting will highlight where monthly bordereaux are not received from insurers in line with Treaty requirements. If you are unable to meet that requirement, please contact Support@floodre.co.uk. Our Market Operations team will be happy to assist with any queries and ensure you can successfully submit your bordereaux.
Inward Premium Update
We are changing the premiums that insurers incur when ceding a policy to Flood Re. From 01 April 2024, the premium charged by Flood Re for polices ceded to the Scheme will rise by 5%. The effective date of changes to the premiums remains 1 April 2024.The tables with details of the current premiums and the new 2024/25 inward reinsurance premiums can be viewed here: FAQs – Flood Re
Flood Re and The Environment Agency joint PFR campaign
We were proud to jointly launch a consumer property flood resilience BE FLOOD SMART campaign with the EA. This was aimed to highlight the benefits of simple resilience measures people can use to protect their homes from flooding.
During August Caroline Douglas (EA) and Andy Bord (Flood Re) were interviewed extensively for local and regional media channels.
We also teamed up with DIY influencers to showcase these products in real life via their social media channels, if you came across any of these please feel free to share with your networks and follow us on our social media using the links at the bottom of this newsletter if you don’t already.
Understanding High Flood Risk Properties
In preparation for Flood Re’s exit from the market in 2039, an exercise was conducted in 2022 to better understand the population of properties that would be difficult to insure in the absence of the scheme. We would like to thank the cedants that provided their insights into the work. The high-level findings from the exercise were:
- Different flood models disagree substantially on which properties are at highest risk
- Flood model divergence aside, there is considerable diversity across the market in how the models are used to assess ‘riskiness’ in the context of risk appetite. A single definition of difficult to insure does not, therefore, give a useful proxy of the market view
- Using a range of definitions and approaches, an initial estimate is that the population of properties that would be difficult to insure in Flood Re’s absence could be as high 600,000
- Tracking how the size of this group moves over time will provide the most valuable insight, and we will return to the exercise on a 3-yearly cycle to see how numbers have moved
Transition Plan
We were very honoured to host around 100 people at the top of the prestigious Gherkin building in the heart of the city of London to launch our most recent Transition Plan in July.
Laura Tobin hosted the event on our behalf and we heard from Flood Re’s chair Mark Hoban as well as The Rt Hon Dame Diana Johnson MP and our very own CEO Andy Bord wrapped things up. We are really excited to be moving into the next phase of Flood Re’s life and preparing the market for our exit in 2039.
A copy of the plan is available to view on our website here: Transition Plan 2023 – Flood Re
Working at Flood Re
We were honoured to be awarded with both the Insurance Post Best Insurance Employer in the SME category (3rd place), AND with the IB UK 5 star DE&I Employer and 2023 Top Insurance Employer!
In addition we had four nominations across two of our wonderful female leaders within Flood Re for the Women in Insurance awards and are delighted to announce that Kelly Ostler-Coyle is a finalist in the Marketer of the year category! Kelly’s creativity and vision have transformed the landscape of Flood Re’s presence and we’re very excited to see what’s coming up over the next 12 months!
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