4 MANDATORY OR VOLUNTARY STATUS UK FLOOD INSURANCE RISK IS SOLD...

3.4  Mandatory  or  Voluntary  Status  

UK flood insurance risk is sold, traded and diversified between only private actors from either the

commercial insurance sector or on private reinsurance markets. Paudel (2012) found that UK premiums,

although risk based, are generally higher than those of equivalent risk found in public-private

compensation systems in other European countries. Despite this, the market penetration for U.K. flood

insurance is between 75 per cent and 95 per cent (Paudel, 2012). This high rate is not the result of laws

that make flood insurance compulsory but by the requirement for flood insurance before a mortgage

can be obtained. Hence flood insurance is a standard part of typical property insurance for both

households and businesses in the UK.