Insurers are in the business of “risk transfer”. Put simply, having identified a risk, such as a flood, businesses and private individuals may transfer that risk by paying a premium to an insurer. In principle, for a risk to be insurable it must be accidental and fortuitous in nature. Events that are deliberate or inevitable are uninsurable; in such circumstances the premium would exceed the claim!
Climate change is of huge concern to insurers across the globe. In recent years, insurers have invested in and developed sophisticated modelling systems that allow them to predict how and where floods might occur, if not when. As a result, many insurers now will not provide flood cover in some high-risk locations or cover is granted subject to enormous excesses.
Thankfully the government together with the insurance industry devised a solution for private individuals that saw the formation of ‘Flood Re’ in spring 2016. Flood Re represents a pooling of resources that enables the provision of flood cover, via your chosen insurer, for those whose properties are in high-risk locations. Businesses, some landlords and residential properties built after 2009 are however excluded from the Flood Re arrangement.
If your commercial property has flooded before or falls into a high risk area it remains difficult to obtain cover or to do so on reasonable terms.
So, can anything be done?
The government in conjunction with the industry is talking about a version of Flood Re for businesses. But in the interim:
- Start by selecting your Insurance Broker wisely; please make sure that yours has access to a wide range of insurers with local geographic knowledge – this can be vital in trying to negotiate the best flood terms.
- It is also now possible to buy Flood Excess Insurance. If the worst should happen – and the property insurer accepts a claim for a flood – then Flood Excess Insurance will cover the excess amount up to a chosen level, usually £50,000.
As with all insurance policies the purchase of Flood Excess policy will depend on your individual situation and risk profile, however, it is proving a popular option for clients who simply cannot find a solution by conventional means to cover their properties against the risks of flood.
The team at ProAktive is available to assist if you wish to discuss any of the above. Contact us today on 01302 341 344 or 0114 243 9914.