Flood Re, the joint initiative between the UK insurance industry and the UK Government to promote the availability and affordability of flood insurance, has reported a “strong financial and operational performance” for the financial year 2023/2024, securing a profit before tax of £23.8 million.
It’s important to note, that 30% of Flood Re’s total claims to date occurred over the last 12 months, in the wake of the winter storms, Babet, Ciaran and Henk.
From what we understand, around one-third of claims submitted to Flood Re for the three storms included Build Back Better (BBB) provisions, though BBB usage varied considerably amongst insurers, ranging from 4%, all the way to 56%.
According to Flood Re, the number of policies ceded to the Scheme increased by 9% to 288,567, with gross written premiums received rising to £59 million, up from £52 million last year.
Meanwhile, Flood Re increased its investment income to £39.8 million for the financial year, compared to £14 million from the preceding year.
The 2023/24 financial year also saw Flood Re invest £900 million into liquid assets and maintain a 238% operational capital ratio.
A key factor to note, Flood Re confirmed that it is committed to ensuring that the Scheme remains sustainable as it approaches its planned exit in 2039.
The second Quinquennial Review (QQR), published by the organisation earlier today, includes extensive engagement with stakeholders to evaluate and enhance the Scheme’s effectiveness in the current context.
The recommendations focus on three main areas:
⦁ Sustainable adjustments: In order to ensure long-term sustainability, future adjustments to the loss limit will be set on a three-year cycle. The cap on annual spending is recommended to increase and investment options are to be expanded. These measures aim to optimise capital utilisation throughout the Scheme’s lifetime.
⦁ Cost-of-living support: Responding to cost-of-living pressures, it is proposed that the £250 excess on claims are to be removed. As well as this, the maximum benefit from the BBB initiative is suggested to rise from £10K to £15K. These changes are expected to help households cope better with financial challenges whilst maintaining premium increases at or below inflation.
⦁ Enhancing BBB: Since its introduction in 2022, the BBB scheme has provided valuable coverage, ensuring that flood victims do not face the same level of devastation in future incidents. With over 70% of policies now supporting BBB, Flood Re aims to further promote its adoption and effectiveness.
Andy Bord, outgoing CEO of Flood Re, commented: “This year, the resilience and effectiveness of the Flood Re Scheme were rigorously tested by severe storms Babet, Ciaran and Henk, marking the most significant flood events since our inception in 2016. We met these challenges head-on and delivered for those most at risk.
Adding: “During my tenure, we’ve achieved significant milestones, such as enabling over 550,000 households to access affordable home insurance and launching the world-first BBB initiative. However, it’s time for all stakeholders to work harder to improve household resilience – including full insurer support for BBB, , provide better consumer information about flood risk and ensure a smooth transition as Flood Re exits the market in 2039. I am confident that Flood Re will continue to thrive and play a crucial role in managing flood risks and supporting affected communities.”
Andy Bord has now stepped down as Flood Re’s CEO, after seven years in the role, as Stuart Logue, the current Chief Financial Officer (CFO), takes over as interim CEO effective from July 18, 2024.
Stuart Logue, CFO and incoming interim CEO, said: “This year showcases the resilience of the Flood Re Scheme. We will continue to build on the good work that has been undertaken under Andy’s management, as we look to the next stage of Flood Re’s sustainable progress.”
Bridget Rosewell CBE, Chair of the Board, added: “In my first year as Chair of Flood Re, I am incredibly proud of the Scheme’s response to extremely testing circumstances. The increase in claims this year highlights the critical importance of flood reinsurance, which will only become more significant as climate change progresses. This highlights the urgent need for all stakeholders to intensify efforts ahead of Flood Re’s 2039 exit.”
