Lending in Flood Zone 3 - watch out for Flood Re in a policy
Fran Green
Award winning account manager dedicated to help organisations and individuals in financial services achieve their full potential.. CeMAP CeRER CeRGI
My current and previous worlds collided recently when an adviser was having difficulty with a decline due to a borrower not being able to obtain insurance on standard terms. The reason being, their property was in a flood zone 3. Having done a stint in general insurance, I was able to help explain why.
At more2life, we have two products, Capital (known for its great rates) and Prime (known for its large releases) where we can lend on a property in a flood zone 3 however we do have a requirement that we can only do so when a standard insurance policy is achievable. With this particular borrower, they had insurance with Aviva on what they believed to be standard terms but the policy had a built in re-insurance feature in relation to flood. This cover, provided by an organisation called Flood Re made the policy non-standard in nature and therefore unacceptable.
For those that don't know, Flood Re?is a re-insurance scheme that makes flood cover more widely available and affordable for households at the highest risk of flooding. With a fixed lifespan of 25 years and formed in 2014, this initiative is due to cease in 2039 at which point they advise "insurers should be offering policies based on [the] actual risk to [the] property".
The concern is that when the scheme ends, if the profile of the risk has not changed (ie. there hasn't been an appropriate mitigation of this risk say, a new reservoir for excess rainfall built or other flood defenses installed) then "policies based on actual risk" could equate to unaffordable insurance premiums or potentially, no cover at all. This then could impact saleability hence why it is a lending risk factor to be considered.
There are two cautionary tales here 1) always worth checking if your customer's property is in a flood risk area* and if so, what is it so you know what you are dealing with and 2) check the detail in the policy with regards to flood risk as your customer may not even be aware that Flood Re exists and what the future implications could mean.
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Here are some useful links and if you have a flood case for equity release you want to discuss, don't hesitate to get in touch. [email protected] 07711 825326
*NB for those advisers using Air Sourcing, this flood check is an automated feature on full quotes. If you're not already using/registered, you should give it a try. www.airsroucing.co.uk
I support our older people to be financially secure in their Later Life. Air's "Later Life Adviser of the Year 2023".
2 年Great blog Fran Green master wu wisdom once again. Interestingly gives the adviser chance to have a go at replacing the insurance for a regular policy through the likes of Paymentshield or others. I’ve done that a few times now and the client usually saves quite a bit in the process
The Later Life Lending Expert. I help people live a better retirement through bespoke?later-life lending. Managing Director of Optimus Mortgages Ltd
2 年Stuart Wilson has already mentioned Air Sourcing, but I will reiterate the benefit of the Flood Risk Report available on there. I use it with ever case I write. An extra little benefit to the client, but a very helpful tool for me too ????
Director of Intermediary Sales - LiveMore Mortgages
2 年Excellent blog Fran Green, hopefully some advisers will find this useful ??