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Flood Seminar: Harriet Boughton

Our third and final speaker at our Flood Seminar was Harriet Boughton, General Counsel and Head of Compliance at Flood Re.

Harriet’s presentation consisted of everything Flood Re, from how Flood Re operates to how property solicitors can play a role in driving the scheme forward.

What is Flood Re?

The Flood Re scheme was introduced in the UK on 4th April 2016, providing a solution to a long-standing problem relating to the availability and affordability of flood insurance. Flood Re is authorised by the UK regulators in the same way other reinsures are and owned and operated by the insurance industry with public accountability to Parliament, meaning the scheme does require Government involvement. With a life span of 25 years, the new scheme is likely to benefit up to 500,000 households.

Flood risk forecasts

Flood Re closely monitor properties and locations at risk of flooding, the forecasts show that

  • Sea levels are expected to rise, increasing the risk of coastal flooding
  • The frequency and severity of rainstorms will increase, increasing the risk of inland flooding
  • Without investment, climate change would mean 500,000 more properties would be at ‘significant’ risk of flooding by 2035
  • 5.2 million properties at risk of flooding (Environmental Agency 2014)
  • 23.8 million properties not susceptible to flooding (Environmental Agency 2014)

What properties does Flood Re cover?

Eligible properties

  • Insured in the name of individuals
  • Must have a Council tax band (All bands covered)
  • Held for residential use
  • Insured on individual basis
  • Occupied by policy holder or immediate family some of the time or unoccupied

Out of scope:

  • Homes built on or after 01 January 2009
  • Small businesses (business rated)
  • Properties (4+ residential units)
  • Buildings cover for leasehold premises 2 or more units

Principles of underwriting eligibility

  • Flood Re’s policy objective is to help those who live in a flood risk area find more affordable home insurance
  • Flood Re is only in operation for a further 23 years
  • Set up to deal with legacy issue which has built up over many years
  • The scheme should not be used as an incentive for irresponsible planning decisions
  • Flood Re’s policy is to be ‘back-to-back’ with the insurers’ standard policies. Flood Re do not expect policies to be gold plated as a response to Flood Re
  • Fundamental underwriting principle: there should not be an increase in the number of residential properties as a result of Flood Re’s existence

With the scheme planned to be in place until 2039, the role for property solicitors is to continue to raise awareness of Flood Re, the eligibility criteria and provide peace of mind for purchasers/sellers, mortgages and financing.

In 2039, the Flood Re scheme is due to end and there will be a free market for flood risk insurance. However, before this date there is a plan in place to help drive lower prices and excesses, benchmark and track prices and availability of household flood insurance, assist in helping the government and flood risk management decisions, provide evidence to understand how households and insurers can reduce flood costs and highlight the changing nature of flood risk.

Found this article informative? Look out for our other speaker’s topics on our FCI news page.

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