The Association of British Insurers (ABI) and the UK government have agreed a memorandum of understanding on the development of a not-for-profit insurance scheme, called Flood Re—that would ensure flood insurance remains widely affordable and available.
Otto Thoresen, the ABI’s director general, said: “Flood Re would be a major undertaking for UK insurers and the work insurers have undertaken to get here reflects the industry’s desire to cover flood risk at an affordable price in the face of the increasing flood threat in the UK. The hard work now begins for both sides if we are to make this vision a reality.”
Environment secretary Owen Paterson added: “Flooding is terrible for anyone affected by it. We have worked extremely hard with the industry to reach an agreement on the future of flood insurance. There are still areas to work through but this announcement means that people no longer need to live in fear of being uninsurable and that those at most risk can get protection, now and in the future.”
Commenting on the plan to establish Flood Re, Robert Rogers, head of UK reinsurance at Willis Re, said: “Willis Re understands that should the capital of the pool be insufficient to pay claims in the start-up years, up until the pool is self-sufficient, then the government will be liable for and guarantee any excess liabilities should the event exceed the one in 200 year return period level, with the industry retaining losses below this threshold in this eventuality."
"The key point is that flood coverage will be widely available and affordable for the vast majority of households. Willis Re also believes that the proposed pool will not impose a significant administrative burden on insurance businesses nor undermine the commercial environment, which will therefore continue to compete to best underwrite the flood risk.”
Providing that operational issues, including governance and regulatory approval, are resolved, the aim is for Flood Re to be up and running by the summer of 2015.
