Flood Re (Part 2)

In order to identify what properties are covered by Flood Re we need to understand how it works.

How does it work?

In brief Flood Re is a non-profit scheme designed for specific task over a specified period of time that allows insurers to insure themselves against any loss caused by flooding. The homeowner will not need to contact Flood Re directly. When the cost of the flood risk part of the policy climbs above a certain level the insurer is to place that part of the policy with Flood Re for a fixed fee that is based on the council tax band for the property. The price is set artificially lower meaning the insurer should be able to offer the customer a lower price for the flood part of the insurance.

"The final amount the home owner is asked to pay for the overall policy will depend on a wide range of factors; each insurer will take these into account in different ways. Considerations could include what the policy holders do for a living, the age and condition of the property, and the likelihood of a claim being made because of fire, theft or subsidence, for example, not just flooding," explains Ben Cobb Commercial Property Solicitor.

Qualifying Criteria

Properties will only be eligible if they meet all of the following criteria:

• The insurance contract must be held in the name of, or on trust for, one or more individuals or by the personal representative of an individual
• Have a domestic Council Tax band A to H (or equivalent)
• Used for residential purposes
• Have an individual premium
• The holder of the policy, or their immediate family, must live in the dwelling for some or all of the time (whether or not with others) or the dwelling must be unoccupied
• Built before 1st January 2009 (if a building is demolished, built pre 1st January 2009, and rebuilt, the new property is still eligible)
• Located within the UK comprising England, Wales, Scotland and Northern Ireland (excluding the Isle of Man and the Channel Islands).

Are any properties excluded?

The majority of homes in high flood risk areas will be eligible for Flood Re, but there are some exclusions:

Properties built after January 1st 2009 are not covered because it’s important not to incentivise home-building in flood risk areas.

• Flats in leasehold blocks containing four or more homes are also excluded.
• Bed and breakfast premises paying business rates;
• Contingent buildings policies (e.g. held by banks);
• Farm outbuildings;
• Freeholders/leaseholders deriving commercial income insuring blocks/large numbers of properties in a portfolio;
• Housing association’s residential properties;
• Multi-use under commercial or private ownership;
• Residential ‘buy to let’ (which do not meet the criteria 1-7 (inclusive) below);
• Social housing properties;
• Static caravan site owners (for commercial gain).

What properties are included?

• Bed and breakfast premises paying Council Tax and insured under a Home insurance contract;
• Farmhouse dwellings and cottages. Where farmhouse dwellings are included in a commercial line policy, provided the insurer can split out the dwelling element (which meets the qualifying criteria above), that part of the risk can be ceded to Flood Re;
• Holiday/Second Homes;
• Home workers;
• Individual leaseholders protecting own property/flat;
• Leasehold blocks will be eligible for buildings cover if they contain 3 units or fewer, and the freeholder(s) lives in one of the units to be insured;
• Residential ‘buy to let’ Static Caravans/homes if in personal ownership;
• Tenant’s / individual’s contents (even if living in large block/flats, where the buildings risk would not be eligible).

There are many positives and negatives to this scheme and only time will tell on whether it will be effective.

Our Commercial Property Team, based in Christchurch, also cover Bournemouth, Poole and the New Forest. For a free initial chat, please call 01202 499255 and Ben or a member of the team will be happy to discuss any questions that you may have.