At the start of the year the bulging river Thames threatened to flood George Clooney’s Grade II listed mansion in Sonning-on-Thames, Berkshire. But because of a new insurance industry initiative, the film star should at least be in a stronger negotiating position when he comes to renew his home insurance policy. The scheme in question is called Flood Re and it became available from 1 April this year, providing affordable insurance to homeowners with properties in high flood risk areas.
The last 15 years have been littered with unprecedented flood events that have devastated towns from Carlisle in Cumbria to Boscastle in Cornwall. On the back of increased claims from these floods, insurers have put up their premiums for properties in flood risk areas or declined to offer cover at all. There was, therefore, a real risk that some homeowners would either be priced out the market or left unable to find cover.
To avoid this, the insurance industry got round the table and came up with Flood Re. Policyholders buy their home insurance as normal. But the insurer can then pay a premium to Flood Re and in return the newly formed reinsurer will pick up any flood losses from the policy, over and above a mandatory £250 excess.
Whilst MRIB don’t insure George yet we’ve already seen the massive difference that Flood Re makes to policyholders. One client owns a four-bedroom home in Wallingford, Oxfordshire that had been flooded in 2003 when owned by the previous occupier. Although underground pumps had been fitted, the insurance premium kept rising and last year Halifax Bank set it at £3,000.
The bank said it had not begun using the Flood Re scheme and so our client either had to pay up or find a new insurer. And so when the client approached us with his problem, that’s exactly what we helped him to do. We spoke to a number of insurers that were signed up to Flood Re, and indentified suitable cover at a cost of only £1,500.
We cut our new client’s old premium in half and we hope to help many more given there are about 350,000 properties in high flood risk areas that could benefit from Flood Re.
To make sure Flood Re has sufficient money to pay out on claims, it will receive an annual levy from every home insurer in the market. However not every insurer has to sign up to the Flood Re initiative and can continue to price and pay for flood claims out of their own pockets.
So far over 20 insurers have said they will participate and it is likely more will join in. The support offered by Flood Re means that these insurers will be able to offer more competitive prices for properties in high flood risk areas and ensure cover is available.
George Clooney might not be too worried about his premiums going through the roof or having to pay out of his own pocket to put things right following a flood. But there aren’t many people who can say the same and so finding a viable solution was essential.