Flood Re to raise liability & loss limits to address evolving reinsurance and flood landscape

Flood Re, the joint initiative between the UK Government and the insurance industry, has revealed changes to key scheme parameters aimed at ensuring the continued availability and affordability of flood insurance.

According to Flood Re, these adjustments, agreed by the DEFRA Minister of State Robbie Moore MP, align with regulatory requirements and address the evolving landscape of reinsurance and flood risk management.

The changes include increasing the Liability Limit to £3.2 billion from £1.9 billion; raising the Loss Limit to £250 million from £100 million; and raising the Levy on the Insurance industry by £25 million to £160 million annually.

The adjustments are set to come into effect from April 2025 and will be applicable through March 2028.

“The decision, agreed by the Department for Environment, Food and Rural Affairs, stems from Flood Re’s regular review process of the Levy and Liability Limit, as mandated by statute and a proactive review by Flood Re of the Loss Limit,” Flood Re explained.

The firm continued, “These modifications aim to ensure that the Scheme remains viable, can accommodate increasing policy numbers, and responds to changes in the global reinsurance markets, such as rising costs and capacity constraints.

“Importantly, it also means that we can put more of Flood Re’s capital to work supporting the Scheme and successfully place one of the largest natural catastrophe reinsurance schemes in Europe.”

Flood Re also stated that due to the careful management of the Scheme, even with these changes, both Levy 1 and most inward premiums will be lower in real and nominal terms than when the Scheme launched.

Andy Bord, CEO of Flood Re, commented, “Today’s changes underscore our commitment to evolve the Scheme, including the successful placement of one of the largest natural catastrophe reinsurance schemes in Europe, ensuring that flood insurance remains both affordable and accessible to those who need it most.

“These adjustments, which are essential for ensuring the scheme’s financial resilience, are designed to balance the interests of all stakeholders, meet regulatory requirements and continue to deliver affordable home insurance to those at high risk of flooding.”

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