Flood Re – the benefits and the shortfalls
Unda’s view on Flood Re
In 2011, the industry formally recommended Flood Re as a long-term flood insurance solution in the UK and after lengthy negotiations an outline agreement between the Government and the insurance industry was reached in June 2013. Since then the industry and Government have been working through the finer detail, and the Water Bill, legislating the powers to set up Flood Re, has been working through Parliament. Royal Assent was gained in May 2014 and the Association of British Insurers is working hard to try and get Flood Re up and running in the summer of 2015.
Flood Re has now been launched and has attracted comment from several outspoken bodies that it is both ineffective and does little to alleviate concerns of a large section of the general public who might be affected by flooding in the future. There are many exclusions to “cover” in terms of those businesses / households that could be affected. Those potentially excluded may include but not be limited to:
– Homes built after 2009
– Rented properties
– Commercial properties
– Farm houses
– Leasehold properties
– Those with a council tax band H
– Pub and other commercial properties
Rental properties alone equates to some 2.6 million homes in the UK that would be unable to benefit from Flood Re cover. However, in common with a similar scheme to cover uninsured drivers where every policy holder pays for the non-insured drivers in the UK, all property policies will carry a levy to fund Flood Re. With reference to Flood Re, the contribution is expected to cost around £10.50 per insured household though a significant number, if flooded, will never be able to benefit from a solution they contribute to financially. The Telegraph describes it as a needlessly expensive tax:
Unda feel that, whilst Flood Re does go some way to alleviate flooding issues for households in affected areas, this represents only 1-2% of commercial and residential properties that could be affected on an annual basis. Unda therefore suggest that advanced and enhanced due diligence is necessary when seeking to purchase either property or land which may be affected by flood risk in the future.
There are some more links written by third parties that are also worth reading:
The FT states that “‘Millions’ put at risk of rocketing premiums by Flood Re exclusion”:
http://www.ft.com/cms/s/0/d081f8a6-45ab-11e4-ab10-00144feabdc0.html#axzz3SBqsJ7TR
Unda feels that never has there been a greater need to ensure that appropriate due diligence is undertaken.
