Preparations are under way for the insurance sector to test Flood Re, the UK Government’s flood reinsurance pool.

Environment Secretary Elizabeth Truss last month approved implementation of the scheme, which is designed to keep premiums affordable for flood-prone homes.

“The draft statutory instruments for the… scheme began their progress through Parliament this week after the secretary of state wrote to MPs confirming Flood Re had been established and was now getting ready to enter its testing phase,” Flood Re said last week.

“Subject to Parliamentary agreement, these draft regulations will give the insurance industry, through Flood Re, the tools to ensure flood insurance continues to be widely available and affordable for homes at the highest risk of flooding.”

Flood Re is a collaboration between the insurance sector and the Government to cap home cover prices in high-risk areas.

A levy of about £10.50 ($21.60) will be imposed on all UK household premiums to subsidise the scheme.

Insurers will “pass on” the risk of flood to a collective fund, where money from all consumers using Flood Re is held. This pool will pay claims after flooding.

Ms Truss says Flood Re “will directly address the availability and affordability of household flood insurance” and is an improvement on its predecessor, the Statement of Principles.

“I believe Flood Re has advantages over other policy options, in particular that it provides greater certainty on the price paid by customers for household insurance,” she said.

“Flood Re also ensures industry support in managing a smooth transition from the end of the agreement on the Statement of Principles.”

Homes built since 2009 and commercial properties, including leasehold ones, will not be covered by Flood Re.