Flood Re rebuffs SME speculation - FREE

Flood Re rebuffs SME speculation - FREE

UK floodFlood Re has responded to remarks made by a UK Government minister who said the UK’s flood risk backstop scheme for residential property insurance policies could be extended as a model to help small businesses.

Transport minister Robert Goodwill, flood envoy for Yorkshire, had claimed that hundreds of local businesses in flood-prone areas had struggled to get effective cover.

Goodwill told the Yorkshire Post newspaper that such an SME scheme would take time to come into effect. 

However a Flood Re spokesman told Reactions that there is no systemic problem in terms of insurance availability, that the existing scheme could not accommodate SMEs, and that Flood Re itself has no plans to extend coverage to include small businesses.

“To date there has not been any evidence that SMEs have a systemic problem obtaining flood cover," the Flood Re spokesman told Reactions.

"That isn’t to say that localised issues do not exist but widening the scope of Flood Re to include SMEs would not be an appropriate way to help those businesses," the spokesman added.

The Flood Re scheme, which is funded by an industry levy and set to go live from April 2016, allows insurers to pass on the risk of insuring flood-prone residential properties.

The scheme recently increased its use of commercial reinsurance markets, buying additional cover to provide £2.1bn ($3bn) of annual protection.

Goodwill had told The Yorkshire Post that businesses such as small retailers are “facing real issues” in getting flood insurance because of the historic location of many high streets next to rivers in town and city centres.

“What we need to do is look at how the model of Flood Re can potentially be transferred onto a small business Flood Re working in a similar way," he said.

“But what we first need to do is learn the lessons of how the new scheme will work...and see how we can transfer any of those lessons to the new scheme,” added Goodwill.

He made the remarks in relation to recent UK floods, which affected swathes of Yorkshire and the north of England in December and January.

Goodwill, MP for the Yorkshire towns of Scarborough and Whitby, suggested a new scheme should apply only to small businesses as larger companies are able to speak directly to insurers.

He made the comments after a private business event held by the Confederation of British Industry at accountancy firm PwC’s office in Leeds.

Countering the MP's remarks, the Flood Re spokesman, added: “Flood Re has been designed to help householders and it wouldn’t be appropriate to ask people in high-flood risk homes, on low and medium income levels, to share their industry subsidy in order to help businesses reduce costs.”

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