For nearly a decade, Flood Re – a joint initiative between the government and insurers – has been the safety net keeping flood insurance affordable for hundreds of thousands of UK homeowners. But the scheme is facing pressure, with costs spiralling and climate change rewriting the rules of insurability.
As the 2039 sunset date approaches, fundamental questions are emerging about the future of flood insurance in the UK and its implications for homeowners in at-risk areas.
The Flood Re Scheme Explained
Launched in 2016, Flood Re was designed as a temporary solution to ensure that homeowners in flood-prone areas could access affordable insurance. The scheme operates as a reinsurance programme, funded by a levy on all UK home insurance policies, allowing insurers to pass on high flood risks to Flood Re at capped premium rates.
The concept was simple: provide universal, affordable cover while gradually transitioning to risk-reflective pricing by 2039. The goal was that improved flood defences and increased awareness would make the scheme unnecessary within 25 years. However, climate change has thrown those carefully laid plans into disarray.
Costs Spiralling Out of Control
Flood Re’s reinsurance costs have surged with a £100 million annual increase, while the amount of risk the scheme retains directly has nearly tripled (Insurance Journal). These aren’t just accounting adjustments; they represent a fundamental shift in the economics of flood insurance.
Net retention increased to £347 million under the 2025-2028 programme compared to £130 million under the 2022-2025 programme, with the global cost of reinsurance increasing and Flood Re facing more frequent and severe claims. This dramatic increase reflects the harsh reality that the world Flood Re was designed no longer exists.
The scheme is also dealing with a troubling trend in claim severity. Flood Re has reported a rise in very large claims exceeding £100,000 and even £1 million. When individual flood events can generate million-pound claims, the financial sustainability of any insurance scheme comes under severe strain.
Climate Change: The Game Changer
Perry Thomas, CEO of Flood Re, has been remarkably candid about the challenges ahead. He stated that the world Flood Re was designed for – one of predictable weather patterns, modest claims and accessible reinsurance – is rapidly disappearing, as climate change has reshaped the risk environment, driving up costs and amplifying exposure.
This isn’t speculation or future-gazing. The evidence is already overwhelming. Roughly 6.3 million homes in England are at risk of flooding, a figure which may reach eight million by 2050. With each passing year, the number of properties requiring Flood Re’s protection grows.
In 2024/25 alone, the number of policies ceded to the scheme rose by 20% to 346,200, which is the highest on record, with Flood Re attributing the growth to climate change fundamentally altering the reinsurance landscape.
What Needs to Change
Thomas has been clear that maintaining the scheme’s viability requires difficult conversations. He stated that the scheme’s evolution must include revisiting how it is funded, how premiums are structured and which properties it should cover, noting these are complex but essential discussions to preserve availability and affordability of flood insurance through to the planned conclusion in 2039.
These aren’t minor tweaks to an otherwise functioning system. They’re fundamental questions about the social contract around flood insurance:
Funding mechanisms: Should the levy on all policyholders increase? Should government contribute more directly? Or should those in flood-prone areas pay a greater share?
Premium structures: Should prices more accurately reflect risk, even if that makes insurance unaffordable for some? Or should cross-subsidies continue?
Property eligibility: Should newer properties in flood zones be excluded? What about properties that could reasonably be made more resilient?
The 2039 Deadline Looms
When Flood Re was established, 2039 seemed a distant horizon. Now, with just 14 years remaining, the challenge of transitioning to a sustainable market looks increasingly daunting. Flood Re is due to end in 2039, which will lead to uninsurable properties and unaffordable flood insurance unless better flood defenses are introduced.
The scheme was always intended as a bridge to a better future – one where improved flood defenses, better planning policies, and property-level resilience measures would make the transition manageable. The question now is whether that future can be delivered in time.
The Bank of England has warned that as flood risks intensify and become more proximate and the Flood Re scheme ends, financial stability risks could develop, with prospective homebuyers potentially seeking property price discounts to compensate for reduced insurance availability and substantially higher premiums.
The Wider Economic Impact
This isn’t just an insurance issue – it has profound implications for the housing market, mortgage lending, and regional development. Properties that can’t be insured become difficult or impossible to mortgage. Areas with high flood risk could see property values plummet, creating negative equity for existing homeowners.
Swiss Re estimates that 21% of potential economic losses from natural disasters are not insured in the UK (Green Central Banking) This protection gap could widen dramatically if Flood Re disappears without a viable alternative.
The scheme currently enables 99% of high-risk households to access quotes from 15 or more insurers. Without it, many of these homeowners could find themselves locked out of the insurance market entirely.
What Homeowners Should Do Now
If your property benefits from Flood Re, now is the time to act:
Invest in resilience measures: Property-level flood protection not only reduces your risk but demonstrates to insurers that you’re a responsible homeowner taking the threat seriously.
Understand your risk: Use Environment Agency flood maps to understand your precise exposure. Knowledge is power when it comes to insurance negotiations.
Maintain detailed records: Document any improvements you make to your property’s flood resilience. This information will be valuable when Flood Re eventually ends.
Stay informed: Follow developments in flood defense funding and policy. Government investment in flood defenses directly impacts your property’s insurability.
Expert Advice is Essential
Navigating the complexities of flood insurance requires expertise, particularly as the market evolves. At Bateman Group, we stay ahead of these regulatory and market changes, ensuring our clients understand their options and secure the best available coverage.
Whether your property currently benefits from Flood Re or you’re concerned about future insurability, we can help you understand your position and plan accordingly. For expert guidance on flood insurance and protecting your property, contact Bateman Group today.
The countdown to 2039 has begun, and the decisions made in the coming years will determine whether flood insurance remains accessible and affordable for millions of UK homeowners. Don’t leave your protection to chance.
