For people living at high risk of flooding, finding affordable home insurance is becoming increasingly difficult and the problem is likely to get worse without action. The Association of British Insurers and the UK government formulated a plan following large scale flood events that highlighted the impact of severe flooding on homeowners and communities.
The UK government's preferred approach was the introduction of legislation that would create a flood reinsurance scheme - known as Flood Re - to help support households at highest flood risk with minimal market distortion. The households will be able to access affordable cover through the competitive home insurance market with a managed transition to more risk-reflective pricing over a 25 year period. The scheme provides support in the parts of the home insurance market that need it, which is likely to be around 2 percent of customers living in areas with the greatest risk of flooding. The Flood Re model depends on a statutory levy paid for by the UK insurance industry.