VIDEO: OXERA: Insurance cover for flooding should continue to be widely available for everyone

Is flooding different to other insurable events? This is the question that was answered by Reinder van DIJK, Partner and Head of Financial Services, OXERA Consulting LLP, UK during the works of IIF - Property Insurance in a Stormy Era.

OXERA, which is involved in the building of a new flood insurance model in the UK, has developed a series of criteria for developing it. "Insurance cover for flooding should continue to be widely available for everyone, while, at the same time flood insurance premiums should reflect the real risk", Mr. Van DIJK explained to the audience. However, local authorities should be encouraged to invest in flood defenses.

In the UK, the existing commitment between government and industry was due to expire soon. A "free market" could lead to consumers with properties at high risk of flooding facing affordability problems. Therefore a subsidy of these high risks was desirable and work on a new model started: an agreement between UK insurers and the Government to develop a not-for-profit company - Flood Re - to allow insurers to pass the flood risk element of a home insurance policy into a fund that will pay any subsequent flood claim. It is designed to enable high flood risk households to obtain affordably priced flood insurance.

It was estimated that between 300.000 - 500.000 flood-risk UK households would struggle to obtain affordable priced flood insurance without a scheme like Flood Re.

The UK Government and others agreed with us that the Flood Insurance Statement of Principles established in 2000 had become unsustainable and that a new approach was needed to help flood risk households obtain affordable flood insurance. The Statement was only ever intended to be a temporary measure, and restricted customer choice as insurers only had commitments to their existing customers, and new insurers can decide to whom they offer flood insurance.

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