For some homeowners, every winter brings with it the fear of flooding and the considerable loss and damage which it may cause to their property.
The risk is increasingly common in the UK says the government-backed Money Advice Service.
The principal line of defence against that risk is flood insurance – indemnity against the damage caused, so that you have the financial wherewithal to repair or reinstate the building after flood damage and to replace contents which have been destroyed beyond repair.
That is all very well if you can get flood insurance.
The problem arises because insurers are naturally more wary of insuring a property which has been subject to flood damage in the past or lies in an area of high risk from flooding as sea and river levels rise following heavy storms.
The Environment Agency’s website offers a free service where you can check the level of risk of any property in the UK and even request a report, based on the Agency’s historical records, of past episodes of flooding in that area. If the preparation of such a report es expected to take longer than 18 hours to assemble, in which case you may be charged for the service.
In response to those heightened risks, insurers have typically rejected cover in the future or increased the cost of premiums to a practically unaffordable level.
That response has been tempered by joint efforts between the insurance industry and the government to spread the cost of providing realistically-priced flood insurance for all homeowners – including those in areas of higher risk.
The scheme is called Flood Re – a reinsurance scheme to which participating insurers contribute a premium and which then provides indemnity and security enabling lower premiums to be charged to consumers. Consumers themselves have no immediate or direct contact with Flood Re but continue to arrange their flood insurance with an insurer in the normal way, enjoying the lower premiums which the scheme facilitates.
The success of the scheme may be measured by the fact that, with effect from the 1st of January 2019, Flood Re is reducing the reinsurance premiums which it charges participating insurers – and the savings are expected to be passed on to consumers as a result.
Reinsurance premiums are calculated according to the council tax bands of the homes covered by the relevant flood insurance policies issued and, from the start of 2019, those premiums are to be reduced by 12.5% for building insurance policies and by 33% for contents policies. It is estimated that this equates to a reduction of between £44 and £112 for the average combined building and contents insurance policy for homeowners.
In calculations on the effect of reducing reinsurance premiums, nearly 7 million test records were examined, and these revealed that a significantly greater percentage reduction was appropriate for contents insurance premiums charged to consumers compared to building insurance premiums.
Thanks to the success of Flood Re, therefore, you may rest easier in the knowledge that affordable flood insurance is likely to be available to keep your home safely protected against these risks of loss and damage.