Affordable insurance
Flood Re, established by the Water Act 2014, is a
reinsurance company which aims to make the flood cover
part of household insurance policies more widely
available and affordable.
The scheme is funded by home insurance providers who
must pay into Flood Re. Householders buy their home
insurance in the usual way and in turn Flood Re covers
flood risks.
The organisation sets out several plans to make the UK
more resilient to flooding. It has a range of proposals
including, for example, its suggested approach to
build back
better . This is where claims payments can include
an additional amount for resilient or resistant repair
beyond the cost of original damage.
On 14 July 2020, the government announced a number of
specific changes to the Flood Re scheme – some
which go further than Flood Re’s proposals. Subject to
consultation, these will aim to improve the efficiency
and effectiveness of the Flood Re scheme and encourage
greater uptake of Property Flood Resilience among UK
households at high risk of flooding.
GAD’s work
As part of its remit, Flood Re is required to review
its work at least once every 5 years and report the
results to the government. The 2019 Quinquennial Review
(QQR) was its first such assessment. It was carried out
before the end of the 5-year period and reported in
July 2019.
GAD reviewed the detailed supplemental report
‘Actuarial Analysis of QQR Proposals’ on behalf of the
Department for Environment, Food and Rural Affairs. We
scrutinised and reviewed the methodology and
assumptions Flood Re applied in its QQR testing.
Feasibility testing
Nick Clitheroe, who oversaw GAD’s review said: “This
was an important milestone for Flood Re. It marked the
midway point of the organisation’s first 5 years. It
also set out recommendations and plans for the second
QQR period from 2021 to 2026.
“We analysed and tested the feasibility of the package
of proposals. We found that based on the modelling and
wide range of scenarios, the financial elements of the
QQR recommendations are affordable.
“GAD’s role was central to the financial probity of
Flood Re’s Quinquennial Review. We also looked at
investment proposals and agreed with Flood Re that some
changes could help mitigate the impact of inflation.”
