Thanks to a scheme called Flood Re, you can now access affordable insurance even if you live in a high-risk flood area. Here’s what you need to know about it.
What exactly is Flood Re?
Flood Re is a scheme that was created in 2016 to ensure homeowners in high-risk flood areas could still access affordable home contents and buildings insurance. It’s estimated that 350,000 UK households could benefit from the scheme.
How does Flood Re work?
Okay, so first we need to talk about reinsurance – because that’s what the ‘Re’ in Flood Re stands for. All insurance providers take risks by insuring us – after all, when they take on a customer, they don’t know how much they’ll end up paying out.
When a customer looks risky – let’s say they live in an area that looks likely to flood – the insurance provider can refuse to take them on. Or they can sell on the risk to another insurance provider. The process of selling on risk is called reinsurance.
To put it simply, reinsurers insure insurance providers.
So how does Flood Re affect me?
Flood Re doesn’t affect you in that you’ll still deal with your insurance provider in the same way you always have. But behind the scenes, your insurance provider is paying the Flood Re part of your insurance premium.
Flood Re takes this money from a number of different insurance providers, and so spreads the risk away from any single provider. It's up to the insurance provider to decide if they’ll offer you a policy and use Flood Re for it. It’s also up to them to set the price for your policy.
To qualify for Flood Re, the householder or the householder’s immediate family must live in the property for at least some of the time during the policy period.
In the event that you make a claim for flood-related damage, your insurance provider will pay you as usual, then recoup the money from Flood Re.
How is Flood Re different to other reinsurance companies?
In some ways, Flood Re is no different from any other reinsurance company. It receives premiums from insurance providers and pays back their claims. But there’s one key difference:
Without Flood Re, insurance providers may have decided they simply couldn’t afford to insure people living in flood zones. This would have left many people without protection. The Government stepped in and worked with the insurance industry to set up Flood Re as a not-for-profit scheme. This is the important bit as it means households see lower premiums than they would have done otherwise.
How does Flood Re help homeowners?
- Flood Re means insurance providers can offer policyholders more competitive prices
- It means that people who feared being left uninsured shouldn’t have to worry about getting cover
How does Flood Re help tenants?
If you rent a home in a flood risk area, your home contents insurance policy could be backed by Flood Re. But you should check that your landlord has insurance cover in place, because most landlord policies offer help towards rehousing costs.
Do I need to do anything differently?
Not at all. Flood Re has no control over the prices or terms your insurance provider offers. But it’s hoped that as insurance providers are relieved of the financial burden of flooding, those benefits will be passed on to customers.
What are the long-term plans for Flood Re?
Currently Flood Re is set to end in 2039. But assuming it’s a success, it’s likely to continue in some form after that.
The more insurance providers use it, the more financially viable it will be, and will therefore be more able to reduce premiums for families in high-risk flood areas.