7 September 2015
Flood Re (FR) is a reinsurance scheme providing a facility to insurers to cede high risk flood premiums. We believe the scheme will go live in April 2016 with the first Levy due 6 April 2016. The scheme has been set up by the UK government in conjunction with the insurance industry at a cost of £10 million. All insurers who register, and the government is pressing them to do so, can pass on the flood risk to FR at a capped premium based upon a council tax band of properties. Insurers will be charged an annual Levy (to be paid quarterly) of £180 million based on their share of the home insurance market. This equates to roughly £10.50 per household. FR then collects the Levy and purchases its own reinsurance to cover claims.
The FR Scheme Administrator will request funds and be responsible for calculation of the Levy. In short the calculation equates to multiplying the total levy (£180 million) by the result of dividing the gross written premium by the sum of all relevant insurers. The Levy rate will be assessed by the government every five years. If these funds are not sufficient, perhaps in an emergency situation, FR reserves the right to impose an additional, or top up Levy.