Flooding is the UK’s most catastrophic natural disaster. The country is regularly tested with heavy rainfall, leaving land and property under the threat of rising water levels. However last month the strain from high rainfall was the greatest Britain has ever faced in the single wettest month ever since records began back in 1910. As Storm Desmond, Eva and Frank battered the UK many homes in the North of England, North Wales and the border counties in Scotland were flooded.
Properties were flooded, roads destroyed and bridges swept away, with rainfall nationwide being 191% higher than average for the month. Records were also broken for the amount of rainfall within 24 hours (341.4mm in Honister Pass, Cumbria, Dec 5th 2015) and within 48 hours (at least 405mm Thirlmere, Cumbria, December 5th and 6th 2015).
For the residents of Carlisle, one the worst effected regions, the floods took them completely by surprise. Many were led to believe that the anguish of 2005 could not be repeated. After those floods, £38 million was spent on new flood defences which included raised levees, 30 flood gates and 2 raised foot bridges as well as CCTV cameras. The Environment Agency advised the citizens of Carlisle that it would take a ‘one in two hundred year event’ for the new defences to be breached. Unbeknownst to all at the time, the next catastrophe was only ten years away…
Many of Carlisle’s community did not have home insurance when the city’s rivers began to rise. Sitting on a flood plain many insurers simply wouldn’t accept the risk of insuring a home that is easily prone to flooding. The few insurers that would be able to provide home insurance would only offer cover for flood insurance at the cost of a high premium, substantially too high for many residents.
Flood Re is a scheme which is set to launch on the 1st April 2016 which will allow consumers to purchase affordable home insurance even if they live in one of the 350,000 households vulnerable to flooding.
Not only will these homeowners benefit from cheaper premiums, they will also have greater choice in their home insurance provider as they will not be limited to the few insurers that would provide cover in a high flood risk area.
Insurers in the home insurance market will pay an annual levy of £180 million towards Flood Re, with each insurer paying a sum in relation to their total nationwide market share. In addition homes that would be covered through the Flood Re scheme will pay a set amount for the flood risk element of their buildings insurance, contents insurance or combined buildings and contents insurance. The different amounts are set through the council tax bands shown in the table below. This means that if you want to insure a property to cover flood risk as well you will pay a premium of the set amount dependent on the Council Tax Band plus the variable premium to cover other perils such as fire, theft or accidental damage.
Flood Re will act as a reinsurer to insurers that provide home insurance to areas with a flood risk. If the customer makes a claim for flood damage the insurer would pay the claim and be reimbursed by Flood Re. All other perils to buildings and contents such as fire and theft would still be covered solely by the insurers as normal.
The move to introduce Flood Re was not only for insurers to gain more customers but it is also taking a holistic view of the home insurance market, particularly the moral dilemma that the people most in need of insurance are the ones who are finding it the hardest to acquire.
However, not everyone is happy with the scheme. This is because Flood Re only covers occupied residential properties. This means that commercial properties, most blocks of flats and second homes would be ineligible. Also properties built in 2009 or after are not covered. This was included to discourage the building of new properties in flood risk areas.