You may have heard of the term ‘Flood Re’ when talking about household insurance, particularly with properties in high flood risk areas. But what is Flood Re, how does it work, who does it help, and how does it affect you?
Flood Re: Explained
The easiest way to think about Flood Re is as a company whose sole industry lies in reimbursing household insurers for qualifying flood claims.
Flood Re is an industry and government-backed scheme designed to provide affordable flood insurance to more than 350,000 flood-vulnerable UK homes.
The scheme is a not-for-profit reinsurance body, owned and managed by the insurance industry, which has been in the planning stages since July 2013 when the previous insurance protection for consumers living in flood-prone areas, called the Statement of Principles, expired.
The scheme is only intended to cover those properties most at risk and Flood Re works by allowing insurers to pass on the flood risk part of an insurance for vulnerable properties to Flood Re. In the event of a flood claim, the insurer pays the policyholder’s claim, then seeks reimbursement from Flood Re.
How is Flood Re Funded?
Flood Re receives funding from insurers for each Flood Re policy it writes, and a levy paid by all insurers authorised to write home insurance in the United Kingdom, according to market share.
The capped premiums start at £210 per annum for a combined buildings and contents policy for homes in Council Tax bands A and B. Premiums rise to £1,200 per annum for homes in Council Tax band H.
Because insurers pay these premiums, homeowners do not have to do anything extra and it is business as usual.
How do I know if my Property Qualifies for Flood Re?
Properties are eligible for Flood Re if they meet all the following criteria:
- The home is covered by an insurance contract, which is held in the name of, or on trust for, one or more individuals or by the personal representative of an individual.
- The holder of the policy, or his or her immediate family, must live in the property for some or all of the time (whether or not with others), or the property must be unoccupied.
- The home has a domestic Council Tax band A to H (or equivalent).
- The home is used for private, residential purposes.
- The home is a single residential unit or a building comprising of two or three residential units.
- The home is insured on an individual basis or has an individual premium.
- The home was built before 1st January 2009. It should also be noted that if a home is built before 1st January 2009, but then is demolished and rebuilt, the new home is still eligible.
- The home is located within the United Kingdom comprising England, Wales, Scotland, and Northern Ireland—excluding the Isle of Man and the Channel Islands.
What Properties are Excluded from Flood Re?
Flood Re has certain exclusions. For instance, flats in leasehold blocks containing four or more homes are excluded. To discourage unsafe building practices, homes built after 1st January 2009 are also excluded in order to avoid unwise building in high-risk flood areas. Additionally, the government has confirmed that current Flood Re legislation excludes small businesses and charities.