As climate change accelerates, so too do its impacts on communities and economies – and nowhere is this more evident than in the rising risk of flooding across the UK. Flood Re, the government-backed reinsurance scheme established in 2016 to make flood cover more accessible and affordable for homeowners, is now facing unprecedented pressure. According to its latest annual report, the scheme has delivered record support to UK households, but its leaders are sounding the alarm: reforms will be essential if it is to remain sustainable.
Over the past decade, Flood Re has helped more than 660,000 households obtain flood insurance, providing crucial protection to those living in high-risk areas. In the 2024/25 period alone, the number of policies ceded to the scheme surged by 20%, reaching a record 346,200. While this demonstrates the vital role Flood Re continues to play, it also reflects the growing reliance on the scheme amid escalating climate threats.
This increased demand is happening at the same time as the global cost of reinsurance rises sharply. Flood Re has seen a notable uptick in both the frequency and severity of flood claims. Large individual claims exceeding £100,000 – and in some cases surpassing £1 million – have driven the scheme’s annual reinsurance costs up by £100 million. Meanwhile, the volume of risk retained directly by Flood Re has nearly tripled, adding further strain to its financial model.
The Impact of a Changing Climate
The challenges facing Flood Re are part of a broader story of how climate change is reshaping risk landscapes across the insurance industry. Warmer temperatures are leading to more intense rainfall and unpredictable weather patterns, resulting in flash floods and surface water events that are harder to model and more damaging in their impact.
Perry Thomas, CEO of Flood Re, put it bluntly: “The world Flood Re was designed for – one of predictable weather patterns, modest claims and accessible reinsurance – is rapidly disappearing.”
As a result, Thomas warns, significant reforms are needed to ensure the scheme remains viable through to its scheduled end date in 2039. Potential changes include adjusting premiums, revising the scheme’s funding mechanisms, and reconsidering the types of properties eligible for coverage.
“These are complex but essential discussions if we are to preserve the availability and affordability of flood insurance for the long term,” Thomas added.
What Does This Mean for the Insurance Market?
While Flood Re continues to support households, commercial properties remain outside the scheme’s scope. This leaves many business owners at the mercy of increasingly conservative underwriters. Insurers are adopting stricter flood mapping tools, which now flag larger areas as high-risk, often resulting in higher premiums or denial of cover for commercial premises.
That said, there are still alternative insurance solutions available for commercial properties, though they may involve specialist providers or bespoke risk management measures. Insurance brokers play a key role in helping both personal and commercial insurance buyers obtain flood cover and in putting together alternative solutions tailored to their clients’ specific needs. Brokers and policyholders will need to work closely together to explore all available options.
Looking Ahead
Flood Re’s evolving situation is a wake-up call for the entire insurance sector. Without bold reform, we risk undermining the availability of vital cover for those most at risk of flooding. For homeowners and businesses alike, proactive adaptation and a willingness to engage in innovative risk solutions will be essential.
As climate change continues to shape the future of insurance, one thing is clear: maintaining access to affordable flood protection will require a united effort from government, insurers, and the public alike.
