Flood Re, the UK’s flood reinsurance facility, has outlined the changes it believes are necessary to achieve affordable risk-reflective pricing by 2039.
The second transition plan, titled ‘Flood Re, Our Vision: Preparing for a future of affordable flood insurance’, covers 12 areas and includes limiting the risks of flooding, reducing the costs of flooding, promoting a competitive insurance market, and understanding the limits of affordability.
“Millions of properties in the UK are exposed to some degree of flooding. When flooding occurs, the costs to individuals, families, communities and even whole regions can be devastating,” explained Andy Bord, Chief Executive of Flood Re.
Flood Re believes that an affordable market will be in place in 2039 if it can cease to exist without household insurance premiums and excesses for the majority of at risk-properties increasing and without “the penetration of household flood insurance reducing significantly in at risk-areas.”
Limits must be recognised for households at the very greatest risk of flooding, where the investment needed to reduce risks will always be uneconomic. Flood Re says this means that, even with a successful transition, there will be a small number of households where flood insurance is likely to be viewed as unaffordable. To tackle this, “policymakers will need to decide whether some form of support continues beyond 2039.”
“‘Our Vision’ is an important milestone for Flood Re achieving a successful transition,” continued Bord. “By 2039, when the Scheme ends, the market needs to have risk-reflective pricing and at this point we also want to ensure that both premiums and excesses remain affordable for the majority of households at risk of flooding.”
Additionally, Flood Re has called for action from government bodies, the insurance industry and from householders moving forward.
“To achieve these two objectives, action will be needed from all interested parties – including the Government, the insurance industry, communities and individual householders themselves,” added Bord.
“Flood Re will play an important role in supporting this activity, convening and coordinating and, where we can, taking direct action. We look forward to working with others to ensure a successful transition over the next two decades.”