The UK’s insurance industry and Government have announced the final agreement securing the development and delivery of Flood Re, described as a “pooled insurance system which will allow even the highest risk homes to insure against floods,” by the Association of British Insurers (ABI).
The new reinsurance system was established in response to the devastating floods which affected hundreds of people last year. An ABI bulletin notes that “the solution proposed by the UK insurance industry has now been agreed with Government and implementation can now move forward so as to provide peace of mind for hundreds of thousands of homeowners at risk of flooding.
“The final points of negotiation have all been agreed including the inclusion of properties within council tax bands H and I in the scope of Flood Re.”
ABI Chairman Paul Evans commented: “A year on from the floods that had such a devastating impact on home owners across the country, this is a great result that will ensure continued access to affordable insurance for all who were previously covered by our voluntary statement of principles.
“Today’s agreement has taken real determination from the insurance industry to develop the details of a workable proposal for Government, and a number of tough decisions have been necessary on both sides to make it a reality. I would like to thank all insurance firms who have worked so hard to get our Flood Re initiative to this critical stage, and to wish Brendan McCafferty, CEO of Flood Re, and his team, every success in now driving implementation for the benefit of our customers.”
ABI Deputy Director General Huw Evans added: “This agreement demonstrates once again the determination of insurers and the Government to get Flood Re up and running so that residents at highest risk of flooding can access affordable and available insurance.
“Insurers are investing £17 million [$26.6 million] and thousands of hours of expertise to get Flood Re built and to play our part in helping manage this country’s flood risk. Today’s agreement marks a big step forward in this task.”
The ABI said “Flood Re will provide a fund that will pay out claims made by those flood risk households who without it would likely struggle to be able to get or afford flood insurance – we estimate between 300,000 -500,000 homes could benefit from it.”
It also described the initiative as a “world first,” adding that the insurers involved “are working flat out to make happen. Flood Re will allow insurers to pass the flood risk element of any home insurance policy to it at a set premium based on the property’s council tax band.
“Insurers will continue to set premiums for both buildings and contents insurance, taking into account other risks such as fire, theft, subsidence, the overall claims experience on home insurance policies, and other factors in the competitive UK property insurance market.”
Flood Re also issued its own announcement, indicating that the “agreement paves the way for the next key steps needed in the implementation of Flood Re. The firm will require full regulatory approval from the Prudential Regulatory Authority and Financial Conduct Authority. Flood Re expects to announce the successful bidders for both the Managing Agent and Reinsurance Broker in January.”
It also announced the appointment of its Chief Financial Officer, Adam Golding, currently Finance Director of Amlin Underwriting Ltd. and its Operations Director, Aidan Kerr, currently Assistant Director and Head of Property at the ABI “where he has been instrumental in designing and shaping Flood Re over the last two and a half years.”
McCafferty said: “My top priority on becoming CEO of Flood Re in November was to lead Flood Re’s negotiation with the Government to try and resolve the outstanding issues around its design. I am very pleased we have reached a workable and sensible agreement that will enable Flood Re to move forward. As a result, we are closer to the day when we can deliver on our promise to help provide affordable and available insurance for those at greatest risk of flooding.”
Sources: The Association of British Insurers (ABI) and Flood Re
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