Business properties unable to access Flood Re

Image of properties overlooking the water at Topsham, Exeter, Devon

Flood Re has helped around 350,000 home owners obtain buildings insurance, but the Department for Environment, Food and Rural Affairs (DEFRA) says that helping owners of business properties in a similar way can be problematic.

The Flood Re scheme was set up in 2016 to protect thousands of home owners who were unable to secure home insurance due to their homes being flooded. The scheme is funded through a levy on household insurers and allows insurers to pass the risk to the Flood Re scheme. The premium is based on the council tax banding of the property and gives home owners access to affordable home insurance.

Flood Re does not cover owners of business property.

One of the concerns is that properties close to rivers and the coastline, can do very well because of their prime location and other business owners would be unsympathetic about indirectly subsidising these more successful businesses. Consequently, these buildings can now only get insurance with caveats attached, including exorbitant insurance premiums and policy excesses.

Business premises are not the only buildings affected by rising insurance levels, as there are householders who live on the premises while also running a business from their home. People including B&Bs, corner shops and post offices, who live in the building in which they run their business, are not covered by Flood Re. This means that flooding can mean the loss of their home as well as their business, and they are unable to access support.

The threat of recent persistent and heavy rainfall this year, has led some businesses to consider calling it a day. Those with buildings that were flooded in 2009 and 2015 have found it increasingly difficult to obtain buildings insurance. Rebuilding insurance claims have led insurers to impose excessive policy excesses, some in the region of £50,000, and have also forced property owners to pay as much as 75% of the claim. A further policy is needed to reduce the excess of the first policy.

Insurers would normally cover more complex risks through spreading the risk across less risky businesses.

Is the weather getting wetter?

The UK is pretty wet most of the time, and indicators show that our climate is getting wetter. The Met Office says five day periods with the highest rainfall totals increased by 4% over the ten years between 2008-2017, compared to the period between 1961-1990. Furthermore, the volume of rain that has fallen on wet days has increased by 17% over this time.

It is thought that climate change resulting from human activity has increased the risk of heavy rains and flooding in England and Wales by around 60%. Climate change has also increased the likelihood of drier summers, but there is a higher risk of flash flooding during future summers, due to heavy burst of rain falling over a short period of time.

When and where is it wettest?

Topography, geology and other factors make flooding events difficult to predict, but the biggest changes have been in Scotland. There has also been significant flooding elsewhere in the UK, although the Met Office says it is less likely in the south and east of England.

The wettest autumn on record in the UK series since 1910 was in 2000, the wettest winters in 2013/14 and 2015/16, and the wettest calendar month was December 2015, when areas of Cumbria suffered particularly severe flooding.

Rainfall reached 2-4 times the average in the west and north, while Honister Pass in Cumbria set the UK record for rainfall over 24 hours in December 2015, when 341.4mm of rain fell during Storm Desmond.