New home insurance scheme to cover high flood risk properties

Good news is on the horizon for people owning homes that are classed as a high flood risk. Insurers can often be cagey when it comes to insuring homes that are likely to flood, and in many cases, simply refuse to sell an insurance policy because of it being a high risk property.

In order to try and help people living in these top 1-2% highest risk homes which get refused, insurers have outlined a plan that will hopefully come into effect in the summer of 2015.

Called Flood Re (for Flood Reinsurance), the scheme revolves around insurers selling insurance policies, but then reinsuring themselves from a pool of funds controlled by the Association of the British Insurers (ABI).

The pool of funds will be set up and kick-started with a £10 million payment that will be paid by the ABI.

From thereon out, a small portion of each flood risk policy will be paid into the fund, which the insurers can then use to insure themselves again.

This spreads the risk of insuring such risky properties around the entire industry, rather than have just one insurer pick up the slack, not only making policies more available to people in high risk homes, but also making it a competitive market.

After the disastrous floods which hit people in the UK early last year, leaving their homes uninhabitable, the move has been made to make insurance coverage more accessible.

Better still, it should make no difference to the customer, who will purchase the insurance the same way as normal, and the insurers will deal with the Floor Re system.

Of the 350,000 properties which are considered a high flood risk in the country, fewer than 7,000 are claimed to be unsupported by the Flood Re scheme. Of these ineligible buildings, the majority were built after 2009, and are not covered due to past rulings which try to avoid incentivising building on high risk flood plains.

Although this scheme is too late to help the hundreds of people left homeless by last winter’s floods, it should help to prevent such a disaster in the future, by making full insurance available to those who otherwise would be considered too risky.

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