Flood Re, the UK’s government-backed reinsurance scheme, has announced that it will lower the reinsurance premiums it charges to insurance companies from January 1st 2019, which in turn should lower the cost of flood protection for those most at risk of flooding in the UK.
The premiums Flood Re charges insurers are set based on Council Tax bands, and from the start of next year they will be lowered by 12.5% for buildings and 33% for contents. Flood Re states that this will result in a reduction of between £44 and £112 for a combined building and contents policy.
The government-backed scheme explored the effects of lowering reinsurance premiums with seven major primary insurance companies, which make up two-thirds of the scheme’s total distribution, and analysed over 6.9 million test records.
Ultimately, the end premium charged to consumers is decided by the individual insurers, however, the analysis anticipated that a reduction in reinsurance premiums would result in cheaper flood protection for consumers.
Flood Re’s Chief Executive Officer (CEO), Andy Bord, said: “Our purpose is to make flood cover as part of home insurance more affordable and available. I am delighted today to announce that we will help to make flood cover even more affordable for those most at risk of flooding by reducing our premiums. Our detailed analysis has found that we can reduce our charges to insurers, whilst maintaining a strong financial position and remaining able to respond to significant flooding in future.”
Flood Re states that the analysis revealed that a substantially higher percentage reduction was appropriate for contents premiums compared to buildings.
“Flood Re was encouraged to note the results of our consultation, confirmed across the market, that our premium reductions will result in lower premiums for consumers. Therefore, if some households in flood-prone parts of the country have previously not taken out home insurance for cost reasons, we hope that this move may encourage them to obtain cover. Consumers should always shop around to get the right deal for them,” added Bord.
