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.
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