Flood Re CEO: “Massive collective failure” if scheme doesn’t transition as planned by 2039

As the UK deals with the aftermath of two major named storms, Flood Re CEO Andy Bord has said it would be a “massive collective failure” if the government-backed scheme doesn’t transition successfully into the private market by its scheduled end in 2039.

Speaking on The Insurer TV’s News in Focus programme, Bord said it was imperative the government and industry maintain their commitment to ensure flood insurance remains both affordable and available, as has been outlined in the flood transition plan.

As Bord explained, the Flood Re scheme came to fruition to solve the “market failure that if you lived at risk of flooding, you simply either couldn't get home insurance, or you couldn't obtain affordable home insurance”.

“We also had an additional characteristic, which is we're time limited,” Bord explained.

“The scheme will end in 2039, as a matter of law, and part of the objective is to make sure that when the scheme does end, that actually the need has also ended. So that's about making sure that the risk of flooding is reduced, that when flooding does take place, the impact on individual homes is reduced. And thirdly, that there's a functioning market that's able to operate affordable home insurance.

“If all of those things are true, then we will be able to exit the market, as indeed we must,” he said.

Flood Re has found widespread success. When it entered the market, 0 percent of households with a previous flood claim were able to get more than five quotes, but as of now, that has gone up to 97 percent of households.

One of the key actions that Bord wants to see from the government is to ensure Flood Re’s transition into the private market is as seamless as possible and that future spending on flood defences is keeping track with climate change.

“The government doubled the expenditure on defences back in 2020. Previously, it was £2.6bn over a six-year period. That was doubled to £5.2bn for the six-year period that we're in at the moment. But it's worth remembering, with climate change, what that's doing is broadly keeping the overall flood level flat,” commented Bord.

On the industry side, Bord wants to see continued uptake of Flood Re’s Build Back Better, a scheme in which the insurer of a flooded home provides an additional £10,000 to the rebuild of the home to make it better protected from future flooding. Although three-quarters of insurers have either put the scheme in place or signed up to do so, Bord wants to see it become the norm.

“It’s my personal ambition that we normalise [Build Back Better] within the next year or so,” he explained.

“I don't want to be having questions where we talk about the take-up of Build Back Better. It just becomes a normal part of a household policy, a bit like ‘new for old’ in contents – Build Back Better is part of the way that you're repaired after a flood.”

Early loss estimations for Storm Babet

Commenting on the impact of flooding from Storm Babet, Bord described it as a “horrible and traumatic event” and said losses from the storm are still developing.

“It's still too early to say, in part, because it caused damage in a number of different locations, but clearly, Brechin in Scotland was very badly affected, but also communities in Derbyshire, Staffordshire, Suffolk and elsewhere.

“The Environment Agency, looking at England numbers, reckoned there were about 1,250 properties affected. And even as recently as [1 November], that number was increased to just north of 2,000. So it's still developing is probably the best way to describe it.”

But while the extent of the damage is still being considered, Bord said the flood defences in place are doing what they're supposed to do.

“They're keeping the water back. What we've seen with both storms, both Babet and with Ciarán, is that the Environment Agency in England and the equivalent in the other three countries have raised the awareness actually really well I think,” he noted.

“Prior to the storms arriving, particularly in Scotland, it was well prepared for Babet landing, albeit the damage was significant. Other parts of England, when the storm kind of lingered a bit, particularly in Derbyshire and Suffolk, were perhaps slightly less well prepared, but broadly, defences are holding up,” he added.

In fact, Bord saw the possibility of this year being “below-average” in terms of flood-related losses, a continuation from the last couple of years, which he remarked had been “quite benign.”

Watch the 12-minute interview with Flood Re’s CEO Andy Bord to hear more on:

  • The future of flood insurance
  • Working with government to create “gold standard” public-private partnership and where else this model can be used
  • Impact of Storms Babet and Ciarán
  • Managing the effects of climate change