Tuesday 31 May 2016

Flood Re – Innovation within a conservative Industry!

Following approval from the Prudential Regulatory Authority and the Financial Conduct Authority, Flood Re opened for business on the 4 April 2016.

Flood Re was established to provide affordable cover for households located in high risk flood zones. Access to Flood Re is not available to commercial properties and businesses and house built after 2009.

Under previous agreements between the Government and members of the Association of British Insurers (ABI) flood cover was available. However in many situations the cost and terms were prohibitive leaving those who suffered flooding in a position where they couldn’t move to another Insurer.

The ABI and the Government recognised this lack of competition in the marketplace and hence Flood Re was created as a non-profit reinsurer, owned and managed by the Insurance Industry.

How it works is quite simple. Flood Re will take on the flood risk element of a household policy from the Insurer. In return the Insurer will pay a premium based on the properties council tax band. Furthermore Flood Re will charge the Insurer an excess of £250.

In addition Insurers will each contribute to the Flood Re pot by way of a levy of £180m in total to subsidise the venture.

This allows Flood Re to charge a ‘below market’ premium which is affordable to the consumer with sensible excesses.

The Home owner will not deal directly with Flood Re but with their Insurer in the normal way that will process any claim and be reimbursed by Flood Re.

Flood Re estimate that there are approximately 350,000 households at risk of flooding in the UK therefore this initiative has to be welcomed and will ease the worry and concern of those affected.
A word of warning to the wise.  This is a temporary measure and will cease in 2039 at which stage the market will revert to risk reflective pricing. In the meantime a lot has to be done to reduce the cost of flooding and mitigate future risks.

At this stage there does not appear to be any ‘road map’ outlining how or what will be done to transition. If nothing is done and the Industry and Government just sit on their hands we will revert to the status quo pre Flood Re.

Thursday 7 January 2016

Floods in Cumbria

Few things are more miserable than a flood. One cannot but sympathise with the people of Cumbria on the recent devastation left in the wake of storm ‘Desmond’.

Initial estimates by PwC predict damage could hit £400m to £450m with approximately £250m of this paid by the Insurance Industry in claims.

The Cumbria floods in 2009 caused damage totalling £275m including £175m paid by Insurers.
Across the UK in 2007 flood damage totaled £3.5bn of which £3bn was paid in claims.

These are staggering numbers yet the human hardship and suffering floods like this cause cannot be financially compensated for. The destroyed photos, personal mementos, business records and files. These are the things that make a house a home, a workplace a business and they cannot be replaced.
Properly arranged insurance can ensure that the material damage is made good and the financial loss as a result of the interruption is recovered.

However, many businesses fail to satisfactorily get to this point. The required compensation will only be met if the work has been done in advance. This demands a rigorous approach to arranging insurances combined with ongoing risk management supplemented by a good disaster recovery plan.
It’s at a time like this when a competent broker proves his worth.

At Castlemead Insurance Brokers, we take the time to advise on and arrange insurance cover that will robustly withstand a claim and successfully deliver that critical settlement. This is backed up by our dedicated claims handling unit who assist at every stage of the process.

If you would like advice on Flood Risk Management or a second opinion on your Insurance arrangements, please do not hesitate to contact us