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Lettings chief warns over flooding insurance dangers

Landlords of residential properties in high risk flood areas should look at minimising their risks now rather than be left at the mercy of the open market when the new Flood Re reinsurance scheme launches in April 2016.

The warning comes from Lisa Simon, head of residential lettings for national property consultancy Carter Jonas, in her latest briefing to the firm’s landlord clients.

Flood Re should help between 350,000 and 500,000 homeowners who face the highest flood risks and enable them to insure their properties at affordable rates. 


However, while tenants of these properties will be able to arrange contents cover, the buildings themselves, if they are let, are likely to fall outside the scheme and be at the mercy of whatever premiums the market decides to charge.

“There are wider issues for anyone who owns a property in council tax band H or a home built after January 1, 2009, as these are also specifically excluded from Flood Re, whether owner-occupied or let to tenants” explains Lisa Simon.

“Flood Re is a complex form of reinsurance that will be funded through a levy on every home insurance policy, typically costing about £10.50 for every policy issued or around 2.2 per cent of the premium.

“Insurers will sell insurance in the normal way, and have an incentive to compete for the buildings and contents business of customers with high flood risk because they know they can pass the flood component element of the policy into Flood Re, based on Council Tax band, and priced accordingly – from £210 for Band A homes to £540 for Band G homes” she says.

“Leasehold blocks with three residential units or less will be eligible for Flood Re providing the freeholder responsible for purchasing the buildings insurance lives in the block and the building meets the other required eligibility criteria.

“Flood Re will cover the risk if the residential property is in the name of an individual or personal representative of an individual; has a domestic council tax band (or equivalent), has been added to the Council Tax Valuation List (or equivalent) or been constructed before January 1, 2009, is not in a portfolio of properties for commercial gain, and is lived in for all or some of the time by the policyholder or their immediate family.

“It may be that some landlords will want to sell rather than take the risk of having a home that’s difficult to insure. The availability of Flood Re to private homeowners means properties should still be attractive to buyers, allowing investor landlords to purchase property to let elsewhere. However, it’s important that landlords address this now rather than wait to discover their premiums are uneconomic without imposing huge rent rises to cover them.”

  • Michael Lamoureux

    There are some fantastic documents produced by the European Union concerning flooding in UK. One in particular is titled 'Making space for water' and relates to 'sustainability' targets aiming to return some of the UK to nature. Its worth a read if you are considering buying rural property, it seems some of the UK is 'earmarked' for flood water.

  • Kenny Sahota

    It seems that landlords/investors must be extremely careful here when considering investing in property as there seems to be lots of ways where they are unprotected, even with this scheme in place. Definitely something to think about over the coming year.

  • Michael Lamoureux

    Anything with the word 'Scheme' included should be approached with caution in my humble opinion. A scheme has traditionally been something concocted by those with questionable intentions.

  • icon

    Aside from the delay (April 2016 - farcical when you considered how long this has been in the pipeline for) I think we should be far more concerned about the extensive list of exclusions! Landlords and their tenants could well be left out in the cold with at-risk properties - leading to value blight in some areas (bad for owners) and driving up rent in low-risk areas (bad for tenants). Good articles here: http://www.unda.co.uk/flood-re-delayed-update-how-does-it-affect-tenants-rent/ and http://www.unda.co.uk/flood-re-insurance-for-flood-risk-delayed-until-april-2016/


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