Will new Flood Re Scheme Provide Effective Help for Property Owners in High Risk Flood Areas?

H Band Properties will not be covered Under New Scheme 

In 2000 the insurance industry and the government set up a short term agreement to ensure that people in high risk flood areas would be able to buy insurance with their existing insurer. The agreement was scheduled to end in June 2013 but it will remain valid until the replacement flood scheme, known as Flood Re, is implemented.

Flood Re will be a not-for-profit fund designed to cover exceptional claims in high flood risk areas and will be financed by insurers in the form of an annual levy on the basis that the government will increase capital spending on flood defences by 10%. This proposal should mean that people who are currently paying very high premiums in high flood risk areas will benefit from a more competitive market but whether this will work in practice is another matter.

The proposed Flood Re scheme still poses problems:

• Payments from the fund will be made only in circumstances arising from exceptional flood events – currently outlined as a 1 in 200 year event but can such an event be clearly defined?

• Although insurers are in theory funding the Flood Re inevitably this will be subsidised by consumers and flood risk premiums in high risk areas will be linked to Council Tax banding, with the assurance that a cap will be set on premiums within each band. Owners of H band property and commercial property will fall outside this scheme as it currently stands but it isn’t clear if they will have to contribute without benefiting from the scheme.

• There also seems to be no provision for those people who are already having problems finding flood insurance, or for payments to home owners in severe but not exceptional flood situations.

• The scheme does not include any homes built after the 1 January 2009. The idea is to discourage risky developments within floodplains.

This new agreement is in consultation until the 8 August 2013 but it remains to be seen whether it will deliver lower premiums.