Flood Re, the UK’s new flood reinsurance scheme, has successfully secured a £2.1 billion ($3 billion) multi-year reinsurance program. Flood Re, based in London, will begin operating in April.
In an oversubscribed second phase of the tender process, Flood Re successfully bound the additional capacity required to complete the placement, the organization said in a statement. The three-year program is one of the five largest “natural peril” reinsurance deals struck globally and the second biggest in Europe, Flood Re said.
(The non-for-profit Flood Re will be funded through a levy on all policyholders. The scheme will enable insurers to pass on the flood risk element of home insurance policies, although commercial properties are currently excluded.)
The second phase saw 45 entities offer capacity to meet the required amount to complete the program, with 38 of those parties ultimately securing a share of the placement. In phase one, which concluded in late 2015, some of the industry’s leading reinsurers collectively offered nearly £1.29 billion ($1.9 billion) of multi-year coverage – with leaders Munich Re and Swiss Re contributing very significant support.
“Securing £2.1 billion in annual protection is an important milestone towards Flood Re being ready to accept policies for flood risk households,” commented Brendan McCafferty, chief executive of Flood Re.
“The reinsurance program has been significantly oversubscribed and we are pleased by the strong demand from the reinsurance market. This is an innovative solution that demonstrates the thought leadership only found in the UK insurance industry,” McCafferty added.
“Although the reinsurance process has now been completed on time and ahead of planned budget, there is still a lot of work to be done. We are testing our systems with insurers to ensure they work effectively and will also continue to work closely with the financial regulators to obtain the authorisation we need to operate,” he said.
The reinsurance placement process was conducted with the assistance of reinsurance broker Guy Carpenter.
Charles Whitmore, head of Property Solutions Group, Guy Carpenter, said: “The reinsurance market has proved incredibly supportive of Flood Re from the outset, acknowledging both the opportunity and the level of professionalism running through the whole process. As a result the final placement was relatively straightforward with the world’s largest reinsurers providing the majority of the capacity.”
Source: Flood Re