Storm Desmond battered the North West of England less than a week ago. Our television screens and newspapers are full of images of the destruction caused and the heartache for many families is all too clear to see.
This time the South West missed the worst of the weather but it was only two years ago that similar scenes of devastation were being beamed around the world from the region. Peoples homes have dried out, possessions have been replaced and memories have begun to fade. One spectre that blights these properties going forwards is the problems that those home owners struggle to find affordable insurance to deal with any future flood risk.
Tales of properties that have been flooded attracting a premium of £5000 with an excess of £25000 are not unusual – even where new flood defences have been installed. Other home owners complain that they cannot get insurance or if they go to sell their house new owners cannot get insurance. This doesn’t only affect properties that have actually been flooded but those that are in the same postcode area but have stayed completely dry!
In an effort to deal with this problem the Government and the insurance industry have after much discussion come up with a scheme called Flood Re. This scheme is widely expected to launch in April 2016 although no exact date has been given. The aim of Flood Re is to make sure that people with homes at risk of flooding can obtain affordable insurance.
The scheme will be funded by a combination of an industry wide levy raising £180 million a year and the capped premium for each policy, based on the property’s council tax band. It will work by removing the risk of having to pay out on flood claims from the insurance companies. Flood Re will take over that risk meaning that home owners who find themselves flooded will be paid out by Flood Re. In effect Flood Re insures the insurers. As the insurance companies will not have to pay out they will be able to reduce premiums enabling affordable insurance to be purchased. Home owners who could once not get insurance will be able to shop around in the market place.
Flood Re will cover the whole of the UK and across all price brackets of property.
It will not cover any type of commercial property – buy to let, holiday homes, bed and breakfast will be excluded from Flood Re. properties built after 2009 are also excluded – an incentive for developers to make sure that any new developments are adequately protected from flooding.
Flood Re will be a hugely complex scheme to administer with hundreds of insurance companies having to get their own systems in order, update their IT and make sure that they recognise which policies are the right ones for them to send to Flood Re. It is not a compulsory scheme – the insurance companies have to link in to it.
On the face of it Flood Re looks like a useful scheme that will help hundreds of thousands of people to be able to insure their properties where currently they either cannot insure at all or only by paying enormous premiums. It has been along time in the planning and it is still not known exactly when it will launch but it does seem that there may be light at the end of the tunnel.
Karen Wright is a solicitor in our residential property team in St Austell. If you would like to contact her then please call 01726 74433 or email email@example.com.