From July 2015, private landlords in the UK could be left without adequate flood insurance when a Government scheme expires.
As insurance companies do not guarantee to provide insurance cover against the risk of flooding, an agreement was made in 2008 between the Association of British Insurers and the Government in which UK insurers agreed to provide flood cover for domestic properties in return for Government investment in flood defences.
This agreement comes to an end in July 2015 and could be replaced by a new scheme known as Flood Re, a not-for-profit reinsurance fund financed by a levy on domestic insurance companies (equating to around £10 per household annually).
Under the proposed new scheme flood insurance premiums will be capped and Flood Re will reimburse insurers for any claims made, thereby ensuring that flood insurance remains affordable and available for properties in high risk areas.
However, the scheme would not apply to privately-rented residential properties, which are considered as business premises rather than domestic properties in this instance. Although tenants would be able to obtain contents insurance through the scheme, owners of rented property are not eligible and are therefore not guaranteed access to flood insurance.
Neil Sagoo, partner at Maples Teesdale, comments:
“Although, on the face of it, Flood Re appears to be an excellent example of Government working hand-in-hand with insurers to deliver a solution, eliminating private landlords from the scheme is a huge omission. This not only significantly increases the investment risk to private landlords, but also jeopardises the housing security of tenants in high risk areas.”
Further information on the Flood Re scheme can be found at Association of British Insurers website here