The Bold and Dutiful. Playing a central role in helping the lives of thousands of people and putting flooding and insurance issues at top of mind for the UK government is no small task. However, as Brendan McCafferty, CEO of Flood Re, tells Liz Booth, the industry has every right to be proud of what it has achieved, even if there is plenty more to do
Tell us about the journey to where you are now with Flood Re?
I applied for the Flood Re job two years ago and took up the role in September 2014. The part of the job that appealed to me was the fact it promised to make so much difference to people’s lives. Beyond that, it looked to me that I could use the skills I had acquired over 30 years in the market and, of course, being a chief executive has its own appeal. But it also gave me a chance to work across the industry on something the sector is passionate about and was so determined to make happen.
You were on TV a lot during the launch in April. What do you think the public perception is of Flood Re?
Let’s go back to why it was necessary. The board and I had various conversations about what we needed to do to make sure the people intended to benefit did so. It was clear there was a step needed to make sure awareness was high among consumers. It was also important to get advice out there and ensure they understood they could shop around and not just choose the first insurer to offer cover.
People needed a clear and simple explanation of how it would work. We also wanted the industry to get the credit for what is going on; it has invested a huge amount of capital in getting this right. I think it has had a significant impact and there is every confidence that Flood Re is working. Our campaign has gone down well and there is an appreciable amount of interest, which will pay dividends in time.
Some have observed that the continued pattern of repeated heavy flooding could make properties in certain areas uninsurable in time. How will you manage public expectations and the fact that Flood Re has exclusions on businesses, new build properties in these areas and multiple property leasehold blocks?
Flood Re has always had a clear mandate and its aim has always been about a specific problem. Flood Re was never designed to do more than that. It was designed for a specific objective and it was difficult enough to get going. We benefited from clarity of purpose. It doesn’t mean we can’t learn from it and it doesn’t mean there aren’t other problems to solve. But Flood Re has worked because we were allowed to get on with our own mandate.
Are enough insurers signed up to Flood Re and are there plans to add more?
I think 21 insurers is enough for now. Flood Re has delivered an outcome for a lot of people, including those who didn’t believe it could happen. I have a team of people whose job is to make sure we thoroughly understand what the customer experience of Flood Re is in terms of finding insurance and what pricing is available to them. We are doing that through the insurers working with us.
You will see more insurers joining us this month. We have 83 insurers that have registered an expression of intent with us, so we have already got substantial market share. Consumers can find better prices and there is more available for them.
What are the next steps for Flood Re?
We will stay focused on two things. We want to ensure customer outcomes and experiences are right. We also want to be able to offer support to insurers and, if they are asking for our help, we want to keep our promise to deliver. We have things we want to enhance too.
Could the government be doing more in terms of flood defences?
It is becoming very clear that this is not a single agenda. There has to be thought given to what other areas of policy will play into this – land management, land use, building regulations, planning permission and behavioural economics – as well as significant investment into flood defences. All that has to happen. The insurance industry has a part to play but primarily it is about political will. We need collaboration across government and beyond to make sure the right people are at the right table. For the government, flooding is a test of confidence in a short number of days. There needs to be multi-dimensional thinking and, of course, there is climate change to consider on top of that.
In March, communities secretary Greg Clark announced charities supporting those affected by this winter’s floods will get an £8.4m boost. Will this make a difference and what is your opinion of the Farm Recovery Fund?
I would encourage any help in some of these communities because they deserve that help. It is amazing what some of these people have done to help others in their hour of need but it will not solve the overall problem. The Farm Recovery Fund is a signal that the government is increasingly looking in a more holistic way at the people affected. But, again, it is the strategic things that will make the difference.
Can insurers be doing more to help customers – are they visible enough?
I have the benefit of seeing the ‘war reports’ from insurers and some of them are actually quite modest about the things they were doing beyond the call of duty. There were tremendous efforts made by people working for insurers to make sure everything possible was being done. When I meet people affected, they are much more ready to praise the industry than criticise and are more positive than in the past. Politicians, too, seem to recognise that the insurance industry has raised its game. The floods minister is certainly saying that, both privately and publicly. But is it not the moment for insurers to be complacent.
The Paris Climate Change Conference has placed considerable pressure on the insurance sector to develop better modelling techniques in relation to extreme weather events and flooding. How do you see Flood Re providing insight?
It is important to remember climate change is not the only variable. Having said that, what Flood Re has is a very good picture of what the flood risks are in the UK. For the first time, insurance figures will be brought into a dataset that can be used in the right way by policymakers. But to get to that point there are challenges around data sharing and intellectual property rights – but hopefully we can overcome those to benefit all. It will take a little while but it will build over time. To benefit our stakeholders, that has to be a two-way street. But it will give us an appropriate voice in future decisions.
Flood Re has a 25-year mandate. What do you see as the greatest challenge for Flood Re preparing the sector for that return to reflective pricing?
It is a very good thing that Flood Re is not here forever. Flood Re is an intervention in a marketplace. When you intervene with something like Flood Re, there are consequences and some can be unintended so there has to be a way out. I would hate to think that in 25 years’ time, people are returning to the prices they faced on 3 April 2016. To ensure that doesn’t happen, the cost of flooding has to reduce. What we can do in the meantime is to talk, innovate and collaborate.
What lessons can be learned from the Flood Re experience for other areas where the insurance sector can help fill a social value role?
It might be helpful to reflect that, in Flood Re, the industry has a controlled organisation that is supported by government. It is capital-neutral and has been set up to improve the lives of tens of thousands of people. That is an incredible thing to put together, by an industry that is sometimes perceived as lacking innovation. There are things the industry can learn from this and there are also things that those outside the UK can learn. I have had a lot of interest from people overseas who have been looking very closely at what we are doing. But it is clear from Flood Re that when the industry sets its mind to something, it can achieve so much. The bolder the better is what I believe.
Brendan McCafferty is a qualified accountant and has previously worked for Aviva and RSA. He was formerly UK president of broker Willis (now Willis Towers Watson), as well as a past commercial director at Paymentshield.
He became chief executive officer of Flood Re in 2014 and his responsibilities include ensuring Flood Re is embraced by the insurance industry and achieves its key objective of enabling the availability and affordability of flood insurance for households at risk of flooding.
Mr McCafferty has overall responsibility for applying for regulatory authorisation of Flood Re, building its systems and processes and working with government to establish the required legislative and public accountability frameworks.
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