Flood Cover Challenges in London

In recent years, the quest for flood cover in London has become increasingly challenging for private clients, particularly with the surge in Surface Water Flooding incidents. The 2021 flash floods, which led to substantial losses for insurers, prompted high net worth insurers to become more stringent in offering flood cover in affluent areas like Kensington and Chelsea.

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The Rise of Flood Re

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Amidst these challenges, a potential solution emerged in 2016 – Flood Re. This innovative scheme set up by the government and insurers acts as a levy and pool system to provide the peril of flood in high areas. This scheme has support from major players in the insurance industry, including Aviva, Hiscox, Chubb , Ecclesiastical, Covea, Zurich and Plum. But what exactly is Flood Re?

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Flood Re serves as a not-for-profit fund. Its primary purpose is to enable insurance companies to protect themselves against losses caused by flooding. Unlike traditional reinsurance companies, Flood Re is designed to address a specific issue within a defined period. However, it is important to note that Flood Re is only available for main homes built prior to 2009.

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The Price of Protection

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Obtaining flood cover through Flood Re comes with a cost. Depending on the size and location of the home, insurance premiums could potentially rise by an additional ￡1,500-￡2,500 to secure the coverage. It's important to note that Flood Re does not cover all aspects of flood damage, particularly contents. This element would be a risk that the insurer takes on themselves, and dependent on what a basement/lower ground floor is used for and how much contents and art is kept there, the insurer may deem the risk too high to take. Some insurers may be hesitant to utilise Flood Re, fearing potential disruptions to their loss ratio figures.

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Alternatives to Flood Re

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Some insurers may opt not to use Flood Re and still be able to offer flood terms, subject to specific conditions. These insurers will require detailed information such as whether the basements or lower ground floors have serviced sump pumps, non-return valves, and the construction date of the basement in order to consider the risk further. The more information provided, the better insurers can evaluate whether they can offer coverage on a normal claims excess or if they would need to consider a heightened excess. By not using Flood Re the client would benefit from a better premium.

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A Glimmer of Hope: The Tideway Super Sewer

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The Tideway Super Sewer is currently under construction, aiming to rectify issues with London's outdated drainage system. Built before its current infrastructure, the existing system struggles to cope with the rising challenges of surface water flooding. The Tideway Super Sewer, once operational, could be a game-changer in mitigating surface water flooding. However, conclusive data on its impact is expected to take time.

Using an insurance broker will help clients source flood coverage for properties deemed in higher flood risk areas. Navigating flood cover challenges in London requires a delicate balance between insurance solutions like Flood Re and potential infrastructure improvements such as the Tideway Super Sewer. As climate change continues to impact weather patterns, insurance brokers must remain vigilant and adaptive in securing effective flood protection for their clients.