Flood Re has announced modifications to key aspects of its scheme, designed to maintain the availability and affordability of flood insurance.
The key updates include an increase in the liability limit from £1.9 billion to £3.2 billion, an elevation of the loss limit from £100 million to £250 million, and a change in the annual levy on the insurance industry from £135 million to £160 million, although it was initially set at £180 million when the scheme launched in 2016.
The revisions, endorsed by DEFRA Minister of State Robbie Moore MP, are aimed at adapting to the shifting dynamics of reinsurance and flood risk management.
These adjustments, set to take effect from April 2025 through March 2028, were decided upon by the Department for Environment, Food and Rural Affairs following Flood Re's statutory review of the Levy and Liability Limit, alongside a proactive revision of the Loss Limit by Flood Re.
The changes are intended to ensure the scheme's sustainability, enhance its capacity to accommodate a growing number of policies, and address challenges such as increasing reinsurance costs and market capacity limitations. It is also a response to the recent hardening of market conditions experienced by insurers, marked by inflation and a global decrease in reinsurance availability.
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Despite these changes, the management of the scheme ensures that both the levy and most inward premiums remain lower in real and nominal terms compared to their levels at the scheme's inception.
“Today’s changes underscore our commitment to evolve the Scheme, including the successful placement of one of the largest natural catastrophe reinsurance schemes in Europe, ensuring that flood insurance remains both affordable and accessible to those who need it most,” CEO Andy Bord said.
“These adjustments, which are essential for ensuring the scheme’s financial resilience, are designed to balance the interests of all stakeholders, meet regulatory requirements and continue to deliver affordable home insurance to those at high risk of flooding,” Bord said.
For UK householders, particularly those in flood-prone areas, these scheme modifications will bolster confidence in continued access to affordable flood insurance. According to Flood Re’s latest market analysis, 99% of homes at risk are now able to receive multiple insurance quotes.
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