The Association of British Insurers (ABI) recently confirmed that 90% of claims resulting from the winter floods are settled and the final bill for both residential and commercial properties is looking to be in the region of £1.3bn.
Looking ahead to the coming winter, it will be interesting to see how many future flood claims will be picked up by Flood Re following its launch in April. The scheme currently has a £2.1bn reinsurance programme and 36 insurers have signed up to the scheme, representing 85% of the overall market. The organisation expects this number to rise over the remainder of the year.
Looking at the most recent storms, Flood Re’s CEO estimated that it would expect to see about one third of the total residential property claims meaning that there is a significant amount of headroom for it to cope.
Anecdotal evidence gathered by the scheme so far around the reduction of prices and the reduction in excesses for customers indicates that it is having the desired impact. So what has the team at The Source seen?
We had an initial flurry of queries about using Flood Re but since then, those have dwindled to a steady flow of around two a week. As for actual quotes, it’s been a mixed bag – some we haven’t been able to place as the properties were not in actual flood areas, others were still too expensive. We have had successes however!
One in particular resonates. Our intermediary partner got in touch as their client’s existing insurer was offering a premium but excluding flood cover – a major concern for the client as the property was in a postcode deemed at risk. Our main panel all declined to offer flood cover given the postcode, however we were able to place the policy with one of the UK’s leading household insurers – it was several hundred pounds more expensive but flood cover was included as it was ceded to Flood Re.
Another query from one of our intermediary partners involved a client in the process of purchasing a new property which was in a known flood area. The property itself had never been flooded but the area itself had been previously affected. Again, due to the postcode, the intermediary was having an issue trying to find cover for their client. Our experience described above meant that we were able to go straight to the insurer who was happy to quote as they would cede the risk to Flood Re.
We’re building up our knowledge of the insurers who will transfer cases to Flood Re when they class the property to be in a flood risk area, irrespective of whether a claim has been made in the past or not. If a claim has been made, then reports and further information on the flood event together with details of flood mitigation risks is usually required as insurers consider on a case by case basis. It has also become apparent that some insurers are using their own flood postcode data rather than simply relying on the Environment Agency’s flood map or data from any other organisation.
So while it’s still relatively early days for the scheme, it does seem to be working and providing much needed cover for homeowners in flood risk areas and for those who have suffered a flood event in the past. The proof of the pudding, however, as ever will be in the eating. While we can only keep our fingers crossed that areas of the country don’t suffer from severe winter storms as some did last year, if they do then let us hope that Flood Re policies will respond as they should.
Brian Coulton is head of sales at Source Insurance