Insurers invited to register for early access to Flood Re

Insurers, brokers and software providers are now entitled to participate in Flood Re's 'on-boarding' process, which will allow them to test the system and give them full access as soon as the scheme goes live. The process is mandatory for any industry participant hoping to sign up to the scheme when it goes live, which is expected to be in April 2016 subject to regulatory and parliamentary approval.

Flood Re chief executive Brendan McCafferty said that the scheme, which will open up affordable flood insurance to over 350,000 at-risk homes, was "one of the most significant innovations the home insurance market has ever seen".

"[Flood Re] has the potential to offer significant advantages to those industry participants who are ready for its launch in April 2016, and will help customers in areas at risk of flooding to access the competitive insurance market," he said. "We have been working closely with insurers, brokers, MGAs and the Lloyd's market for a number of months and getting the on-boarding process right will be critical to the success of the scheme."

Flood Re is a joint initiative between the government and the Association of British Insurers (ABI), which is due to replace the ABI's voluntary 'Statement of Principles' on affordable flood insurance once in force. Once established, the scheme would provide certainty to householders by capping flood insurance premiums at a level based on the council tax band of domestic properties.

Under the scheme, claims made by people in homes at high-risk of flooding would be funded through an industry-backed levy, which would be passed back to consumers at an estimated cost of £10.50 on annual premiums. The effect would be that of low risk properties cross-subsidising high-risk properties; a cross-subsidy which currently exists under the existing statement of principles. Insurers have volunteered to observe the existing arrangements until the Flood Re scheme is fully in force.

Industry participants signing up to Flood Re on-boarding will be required to complete and return a number of administrative and legal documents during the three-step process. On registration, they will be required to provide company information and their preferred test dates, and to complete a data-sharing protocol, test plans and readiness assessments. During the testing stage, they will be required to test the systems and report back to Flood Re with their results. They can then move on to authorisation stage, at which an appropriately-authorised individual will be required to sign and return the relevant legal documents.

AXA chief executive Amanda Blanc said that the on-boarding process would be "fundamental" for any organisation hoping to sign up to the scheme.

"While it sounds dull, the fact remains that Flood Re is only capable of going live when all testing, registration and authorisation has been successfully completed," she said.

Last month, Flood Re began tendering for the £2.1 billion worth of reinsurance cover needed to get the scheme up and running. The resulting deal will be the second largest 'natural peril' reinsurance scheme in Europe, and one of the five largest schemes globally, according to an announcement on the company's website.

Flood Re recently submitted its detailed business plan to the UK's financial regulators for approval, and the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) are expected to report back shortly. The regulations to establish the scheme have been approved by the UK government, and are now subject to parliamentary scrutiny.