A new scheme called Flood Re launched on 4 April and has been designed to ensure flood cover is available to homeowners whose homes are in danger of flooding.

Until now, thousands of homeowners have not been able to insure their homes or have been paying large additional premiums to make sure their homes and possessions are protected.

What is Flood Re?

Flood Re is a joint industry/Government sponsored reinsurance fund owned by the UK insurance industry designed to ensure that flood insurance is available for the 350,000 properties most at risk of flooding in the UK.

Initially 17 insurance companies are taking part in the scheme. If necessary, they can pass on any flood risk to Flood Re, which has been funded by the insurance industry as a whole.

Its costs will be covered by an industry levy of £180m a year. Most insurance companies are expected to pass on that cost to their customers, raising average bills by around 2%.

The scheme is open to all UK household insurers and provides them with an opportunity to purchase reinsurance for the flood element of an insurance policy. With insurers being able to pass the flood risk onto Flood Re they can in theory widen their appetite for such properties thereby increasing the choice of insurer for customers. The scheme will be funded by the UK household insurance industry through the payment of a levy, which is compulsory for all insurers and is a proportion of £180m based on the insurers market share, and through the payment of reinsurance premiums.

The reinsurance premiums that insurers pay to Flood Re are based on the properties council tax band.

Insurers are free to decide whether or not to sign up and use Flood Re (although the levy must be paid anyway) and from which date.

The introduction of Flood Re means that insurers will be able to open up their appetite and will no longer decline an insurance risk purely based on the flood exposure as long as the risk is eligible for the scheme.