Insurer take-up for Flood Re, the scheme set up to promote the availability and affordability of flood insurance for eligible home, has more than doubled since its launch on 4 April, according to its annual report and financial statements for the  year ended 31 March 2016.

Flood Re launched on 4 April 2016 with 16 insurance brands taking part in the scheme representing more than half of the UK home insurance market. Since that date the scheme has grown with a further 20 brands offering Flood Re backed policies.

Brendan McCafferty Chief Executive of Flood Re, said the company was talking to more insurers and expect the number to rise from the present level of 36 insurance providers, which represents 85% of the overall market, over the remainder of 2016.

A high profile media campaign accompanying the launch was aimed at raising awareness of Flood Re in high flood risk areas and encouraging householders to take advantage of the Scheme. The Board said it will continue to work with insurers and others to build awareness of Flood Re with people who have been flooded or who live in high flood risk areas. Over time, it is expected that approximately 350,000 homes will benefit from more affordable flood cover and lower excesses.

Flood Re is financed by a statutory levy of £180m per annum on UK home insurers and the premiums it charges insurers for each policy ceded to it which are based on council tax bands.

The levy effectively subsidises the premiums that Flood Re charges insurers, enabling insurers to offer lower premiums to their customers. Flood Re charges insurers an excess of £250 per policy which is passed onto consumers. If an insurer charged a customer a higher excess on a policy ceded to Flood Re, the scheme would charge the insurer the same excess,  effectively capping the excess at £250.

According to the report, the model underpinning Flood Re enables insurers to manage their flood risk exposure more effectively and offer lower premiums and excesses to their customers, thereby increasing competition and choice for consumers.

However, the scheme has a number of exclusions, which includes no provision of cover for homes built after 1 January 2009 or businesses. Flood Re also has a finite life - in 2039 the scheme comes to an end, when the market will return to risk reflective pricing.  

Flood Re has a statutory duty to develop a Transition Plan setting out a path to that goal, with its first Transition Plan published in February 2016. The report said the Board and the Executive of Flood Re will be focused on this in the year ahead.

 The results of the Company for the year show a loss after tax of £6.1m (2015: £0m) ahead of its receipt of regular income at the start of the 2016/17 financial year on 1 April 2016. As a result, set up costs to launch of £7.6m were approved by the Board and incurred by the Company. The costs are equivalent to the Company self-funding its set up from designation to launch. The principal costs relate to the Company’s service arrangements with Guy Carpenter, which provides the Company’s reinsurance broking services, and with Capita and Landmark, the firms which deliver the key operational processes for Flood Re.

In order to finance the arrangements, the company has use of a revolving credit facility of up to £25m. First quarterly payments of the insurer Levy 1, totalling £45.0m, were due to be received by the Company on 1 April 2016. Early receipt of £29.3m of payments enabled the Company to repay the revolving credit facility before 31 March 2016. The Company has obtained an insurer credit rating from Standard & Poors rating agency  of A- (stable outlook) from launch on 4 April 2016.

Click here to download the report and accounts

Waterbriefing is media partnering with the Westminster Energy, Environment & Transport Forum on its upcoming conference Priorities for flood protection in England: insurance, investment and resource management in London on 1^st December. where Brendan McCafferty, Chief Executive Officer, Flood Re will be speaking. Click here for more information about the event.