Flood Re: What you need to know about the reinsurance scheme that launched today

Hayley Kirton
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Storm Frank Causes More Flooding In The North of England And Scotland
Will Flood Re make home insurance more affordable? (Source: Getty)

It's something of a catch 22 – those who are most in need of a good home insurance policy are often those least able to afford it, thanks to insurers needing to raise premiums to adequately reflect the risk they expose themselves to, or simply refusing to cover some areas at all.

That's precisely why government-backed reinsurer Flood Re has been set up. Launching today, the scheme aims to help homeowners in areas at risk of flooding to secure affordable insurance.

Here's our whistlestop guide to what Flood Re has to offer:

So I have to go to Flood Re now to renew my insurance if my home has been flooded?

Not quite. Flood Re is a reinsurer, meaning, in a nutshell, it insures insurers. Homeowners will still approach an insurance company to arrange their policy but the insurer will pass the portion of the risk relating to flooding onto Flood Re, which reimburses the insurer if a claim is made. For funding, Flood Re will collect a tax from home insurers.

Well-known insurers which can provide insurance linked to Flood Re currently include Legal & General, Direct Line, Aviva Home Insurance and Admiral.

How beneficial is the new scheme?

Flood Re is estimated to benefit over 350,000 households.

What's the new price of home insurance for flood hit homes?

Short answer: lower than it was before (probably). Longer answer: Flood Re isn't involved in setting prices for insurance policies, which is still in the hands of the insurance company the homeowner deals with. However, Flood Re predicts that, because it's taking a costly risk away from many insurers, they should be able to pass the price on to consumers. In addition, more insurance companies are now able to offer insurance to those in flood risk areas, enabling consumers to shop around and increasing competition in the marketplace.

How long do I have to secure a deal?

The current plan is to disband Flood Re in 2039.

What are people saying about Flood Re?

Brendan McCafferty, chief executive of Flood Re:

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.

James Dalton, director of general insurance policy at the Association of British Insurers:

Insurance is an essential safeguard for your home and belongings. People in flood risk areas not being able to access affordable cover was a major concern, and why the insurance industry went to great lengths to design and create this world-first solution along with government.

Amanda Blanc, chief executive of AXA UK & Ireland, General Insurance:

We need to be realistic about what Flood Re can do. It is not a panacea for combatting flood risk but it is another very important part of the jigsaw that includes further flood defence investment and construction, implementation of greater resilience in the repair and construction of property and, of course, the cessation of construction on flood plains.