Tamzin Madelli of Hart Brown outlines Flood Reinsurance Scheme
Tamzin Madelli is a Senior Solicitor in Commercial Property at Surrey and London based Hart Brown. Whilst the Flood Reinsurance Scheme doesn’t extend to commercial property, Tamzin outlines the scheme itself for Today’s Conveyancer.
Flooding has always been an issue but has been particularly severe since 2000. The cost of damage runs into the billions and with meteorologists predicting climate change that will increase severe weather events, flooding is a phenomenon we will have to get used to living with.
When acquiring property, flood risk searches can be carried out and enquiries made about past flooding events. In May 2007, guidance was issued to developers of new properties to incorporate flood mitigation measures in construction. This is incredibly relevant as more than 3 million homes are predicted to be built by 2020.
The Flood Reinsurance Scheme (Flood Re) is expected to take effect from April 2016. The purpose of Flood Re is to secure available and affordable insurance against flood risk. Premiums will be capped.
Flood Re will not cover a number of property types including commercial property, residential properties built after 1 January 2009 and mixed use properties. Flood insurance is likely to still be available but it will come at a cost. Premiums and excesses will be market driven. Under the current insurance scheme, insurance premiums are subsidised by those of properties not in high risk areas.
Lenders require insurance to be maintained as a condition of any loan secured against property. For properties not covered by Flood Re, this will come at a cost. The insurance may include hefty excesses and a requirement for the property owner to cover a proportion of the damage.
For properties not covered by Flood Re, it is imperative to ensure that the correct investigations are made on the purchase and that checks are made with insurance companies to ensure insurance is available on satisfactory terms.