Marsh/Guy Carpenter propose UK flood risk reinsurance pool

Marsh has unveiled a new flood risk reinsurance pool in the United Kingdom designed to ensure that home insurance in flood-prone areas is widely available and fairly priced.

Dubbed “Project Noah,” the plan involves insurers pooling their residential flood exposure across low and high-risk areas. Primary companies would then transfer their residential flood risks, less a small retention, to the international reinsurance market, according to Marsh. Reinsurers have traditionally refused to provide flood coverage to individual insurers because of aggregate exposures to flood zones.

“The provision of cost-effective home insurance for homes in areas exposed to flooding is a major challenge for the United Kingdom’s insurance industry,” commented Hutton Swinglehurst, head of flood risk for Marsh UK. “We have tested Project Noah with some of the UK’s largest insurers, as well as leading global reinsurers, who believe that this state-of-the-art model provides an innovative solution to an intractable problem.

“For many years, insurers have been wanting to compete for the business of consumers who would otherwise be attractive were it not for the flood risk to their homes. Project Noah will allow them to do so.”

Marsh has teamed up with its reinsurance arm Guy Carpenter and digital mapping service Landmark Information Group to offer the plan. It notes that a newly-developed risk pricing model can identify the flood risk of every residential property in the United Kingdom.

A five-year-old ad hoc agreement between insurers and the British government related to cover for properties in flood-prone areas is scheduled to expire in June 2013. The Association of British Insurers has warned that roughly 200,000 homes in the United Kingdom could find it difficult to obtain insurance cover when the agreement ends.