UK Flood Insurance Scheme Plans New 'Flood Performance Certificates'

Households in Britain may soon require a Flood Performance Certificate (FPC) to access affordable home insurance, as part of plans to enhance homeowners' understanding of flood risks. Flood Re, a government-backed reinsurance scheme, is collaborating with insurers, lenders, and industry partners to develop these certificates, which are intended to provide a "trusted assessment of a property's flood resilience."

The FPC aims to function similarly to the Energy Performance Certificate (EPC), a mandatory rating for homes being sold or let that indicates energy efficiency. Flood Re stated that an FPC would help homeowners better manage flood risks and support insurance pricing that acknowledges investments in property resilience. The scheme anticipates offering discounts to households that obtain an FPC or complete a comparable self-assessment, thereby rewarding proactive measures to protect homes.

In parallel, Flood Re plans to reduce the premium it charges insurers for contents-only policies in council tax bands A and B from £52 to £25, effective April 2027. This initiative is designed to benefit lower-income households and renters, with the expectation that insurers will pass on the savings to policyholders. This adjustment comes as Flood Re has observed higher repair costs for homes in higher council tax bands G and H, which represent a small fraction of UK properties, compared to those in lower bands A and B, which constitute a larger portion of homes.

Perry Thomas, chief executive of Flood Re, indicated to the Financial Times that the scheme has been subsidizing higher-value properties, with insurance claims from these homes surging. Currently, Flood Re's ability to increase premiums is capped by the rate of consumer price index inflation. With premiums for high-value properties already at this threshold and claim costs escalating beyond inflation, Flood Re is exploring options for greater premium increases and potential claim caps.

Flood Re is also reinforcing its "Build Back Better" initiative. This program supports homeowners in incorporating resilience measures during flood repairs, offering up to £10,000 for such improvements. Flood Re is encouraging broader insurer participation in this approach, aiming for resilient reconstruction to become standard after a flood. Bridget Rosewell, chair of Flood Re, emphasized the importance of focusing support on those most in need, highlighting the planned reduction in premiums for lower-income households and renters. She also stressed that, with climate change, affordability alone is insufficient, and measures like FPCs and Build Back Better are crucial for building resilience and a sustainable flood insurance market.

Floods minister Emma Hardy MP acknowledged the devastating impact of flooding and the vital role of affordable insurance. She stated that under these reforms, the government is working with Flood Re and the industry to evolve their approach, ensuring the scheme is better targeted to support fairness and provide necessary assistance to low-income households in its next phase. Flood Re is funded through a tax on home insurers and a fixed charge per property utilizing the scheme.