Flood Re, the not-for-profit reinsurance company created to enable insurance companies to insure themselves against losses because of flooding has launched today.
Flood Re has said that it will allow insurers to offer competitive premiums and lower excesses to high flood risk homes across the UK .It will do this by spreading the cost and risk across the entire home insurance industry and will be funded by insurers. It is estimated that 350,000 households in the UK are at risk of flooding.
The world-first scheme is now accepting policies from insurers. The launch follows months of preparation, from appointing a board, testing IT systems and on-boarding insurers to securing £2.1 billion in reinsurance cover.
Brendan McCafferty, the chief executive of Flood Re, said: “We have been working tirelessly to ensure we’re ready so that consumers can start benefitting from greater choice and more competition in the insurance market. This should make flood cover more affordable and accessible to those in high flood risk areas over time.
Eversheds partner, Paul Pugh, who advised on Flood Re and served for seven months as Flood Re’s interim chief counsel, said that many households will have peace of mind because of the scheme.
“Though not a financial contributor itself, the Government has made the levy compulsory for insurers, so insurance cover will now be available for many for whom insurance cover was previously prohibitively expensive,” said Pugh.
“The intention is that the fund will run for an initial 25 years, kick-starting a market that will eventually sustain itself.
“Going forward, the Flood Re model could be used to seed new markets where the understandably conservative instincts of the insurance industry are emboldened by a state-sponsored levy or other collective arrangements. New risks from emerging technology, such as driverless vehicles, is an example of where it could be applied.”