This blog has been written by The Flood Hub People.
According to Environment Agency data, around 185,000 commercial properties in England and Wales are at risk of flooding. While the Flood Re scheme was launched for homeowners in April 2016, it wasn’t until December 2016 that the British Insurance Brokers’ Association (BIBA) introduced a scheme specifically for businesses.
The BIBA Commercial Property Scheme supports businesses located in flood risk areas or those that have previously suffered losses from flooding. By using advanced flood mapping data, the scheme provides a precise assessment of a property’s risk, factoring in any flood resilience measures already installed, which may help to reduce premiums. This initiative helps those ineligible for Flood Re, such as leasehold properties, charities, and commercial buildings, access tailored flood insurance.
You can read more about the scheme and BIBA flood insurance on the links below:
BIBA, the Association of British Insurers (ABI), and Flood Re have collaborated to launch the Flood Insurance Directory, helping businesses and landlords locate suitable insurance cover. You can acess it here: https://www.biba.org.uk/find-insurance/buildings-contents-flood-zone/.
For commercial or landlord insurance, select ‘Find a Non-Flood Re specialist’.
BIBA Find Insurance Service: Call 0370 950 1790, Monday–Friday, 9am–5:30pm for guidance.
Investing in Property Flood Resilience (PFR) measures can help protect your business from flooding, reduce downtime, and potentially make insurance claims unnecessary. According to Flood Assist Insurance, every £1 spent on PFR can save £5 on future flood damages. Discover more about PFR on our page here.
Demonstrating flood awareness, such as being registered for flood warnings and having a flood plan, can make insurance providers more likely to offer cover.
Insurance providers may offer flexible policies with lower premiums in exchange for higher excesses, or vice versa. Businesses should carefully assess the likelihood, severity and impact of potential flooding when choosing a policy.
Understanding your flood risk and estimating recovery costs, both tangible (e.g., structural damage, machinery) and intangible (e.g., loss of custom, contractual obligations) helps determine the best insurance approach.
You can check your flood risk by clicking here.
Also known as excess buyback policies, this additional cover reduces the amount payable on the primary insurance excess. Coverage can reach up to £100,000 and is often obtainable online via brokers. While it may not cover the full primary excess, it can make flood insurance viable for businesses in high-risk areas.
Parametric flood insurance, also known as ‘event based’ insurance, is designed to sit alongside your traditional policy. It shares the risk between the underwriter and the policy holder, and is priced through three main ‘parameters’:
If the quote is too high, the customer can consider raising the trigger threshold or lowering the pay-out, or a mixture of both. Once these parameters are set and a premium is accepted, a flood water level sensor is installed on the external face of the premises and when the flood water level reaches the trigger threshold, the policy triggers pays out – usually within 48 hours. There is no loss adjustment, and the pay-out can be used for whatever the policy holder wishes, such as recovery costs, new equipment or staff wages.
There is also the option of a multi-trigger policy, as illustrated below. With this example a flood depth of 400mm would automatically trigger a pay-out of £20,000, but if the flood water continued to rise to 1m, an additional £100,000 would be paid out. This offers greater flexibility and can help to avoid missing out a payment altogether should the flood water fall just below 1m.
With parametric insurance and this type of policy, it is essential to estimate the damage and recovery costs of a potential flood at varying depths of water before deciding on the most appropriate level to insure against. Usually, the greater the flood depth, the higher the recovery costs are likely to be e.g. structural damage or damage to stock, machinery etc. Carrying out this exercise will help to determine what level of floodwater your business could potentially ‘self-recover’ from, and what level it couldn’t. Because a higher trigger depth equates to a lower premium for the settlement figure needed, a business can implement Property Flood Resilience measures at the premises to help raise the trigger threshold and lower the premium.
For further information or to find a broker, visit www.floodflash.co (not .com)
Flood cover may not always be worth the cost; especially for smaller businesses capable of funding their own recovery costs. The smaller and more predictable the loss, the more economical it may be for a business to self-insure.
Setting aside money otherwise spent on the flood risk element of a policy not only helps towards the future recovery costs of a flood, but it could also fund the cost of installing flood alleviation measures, such as flood barriers and other solutions.
For an overview of this information, download our ‘Business Flood Insurance’ resource from The Flood Hub here.
