The European Commission has approved Flood Re – the UK’s state run flood insurance scheme which is set to be funded by an industry-wide levy.

Insurance Age reports that the Commission had feared the scheme may confer an economic advantage to the pool over its competitors and involve state aid.

However, the Commission concluded that the scheme is compatible with EU state aid rules, because such insurance cover might not otherwise be sufficiently available on the private market, and the scheme remedies the market failure without unduly distorting competition.

Commissioner Margrethe Vestager, in charge of competition policy, said: “Today’s decision ensures that insurance coverage against high flood risks is available at affordable prices to those UK citizens who need it most, because they live in regions vulnerable to flooding.

“It is a great illustration of how the Commission and Member States can work together to design effective aid measures that contribute to important public policy goals.”

The decision means that the scheme is one step closer to reality. When originally planned the government, and the Association of British Insurers who shaped the programme, envisaged it being up and running by summer 2015.

Most recently the government confirmed that properties in the Band H council tax bracket are to be included in the scheme.

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