Flood Re: how the UK scheme keeps home insurance affordable in flood risk areas

Most people who benefit from Flood Re have never dealt with it. They bought ordinary home insurance from an ordinary insurer, paid a premium they could afford, and the flood risk on their house was quietly passed to a separate company in the background. That is the design. Flood Re is not an insurer that sells to the public. It is a reinsurer that accepts the flood part of eligible home policies from insurers, charges them a fixed price for it, and pays them back when those homes flood.

The Environment Agency’s national flood risk assessment, published on 17 December 2024, counted 6.3 million properties in England in areas at risk of flooding, and projected that the figure could reach about 8 million by the middle of the century, around one in four properties. For the households at the sharp end of that number, the Flood Re scheme is the reason a flood claim history or a riverside address does not automatically mean no cover.

Why Flood Re exists

The scheme was created by Part 4 of the Water Act 2014 and began accepting policies on 4 April 2016, according to the House of Commons Library’s briefing on household flood insurance. From the start it was meant to be temporary. Flood Re is due to close in 2039, and the law requires it to publish a Transition Plan every five years showing how the market will be ready to insure high-risk homes without it.

The problem it addresses is simple to state. When insurers price flood risk property by property, a small number of homes end up with premiums that their owners cannot pay, or with no offer at all. Flood Re’s 2025-26 annual report, published on 30 June 2026, puts it bluntly: if the scheme left the market today, many of the households it supports would face sharp premium rises or would be unable to get cover.

Flood Re solves this without a state guarantee and without a public insurer. That makes it unusual in Europe. France gives its catastrophe reinsurer an unlimited State guarantee, and Spain runs a public body that pays flood claims directly. The UK chose to keep the risk inside the private market and to make the whole market share the cost. The comparison of European schemes sets the UK model next to the others.

How the scheme is funded: the levy and the Council Tax band premiums

Money reaches Flood Re through two channels.

The first is a levy. Every insurer selling home insurance in the UK pays its share of an annual amount called Levy 1, whether or not it uses the scheme. According to Flood Re’s annual report, Levy 1 was £180m a year for the first six years, fell to £135m from 1 April 2022 and rose to £160m from 1 April 2025. In the end the cost of the levy is spread across the premiums of ordinary policyholders, so households with home insurance all over the UK contribute something towards the flood cover of the most exposed homes.

The second channel is the premium insurers pay when they cede a policy. This premium is not based on flood risk at all. Flood Re sets it by the property’s Council Tax band, on the logic that the band is a rough proxy for the value of the home and the means of the household. The figures for 2026/27, published in Flood Re’s own FAQ on how ceded premiums are set, run from £205 for a combined buildings and contents policy in Band A to £1,613 in Band H.

Flood Re also buys reinsurance of its own. The annual report says its programme protects the full Liability Limit, which was raised to £3.2bn from £2.2bn (the inflation-adjusted value of the original £2.1bn). It also sets a Loss Limit of £250m a year. Under the new structure, a £3.2bn loss would leave Flood Re retaining about £347m, compared with about £130m before. In 2025 the scheme placed its first catastrophe bond, a way of moving part of that risk to capital-market investors.

What happens above the Liability Limit is the part of the design that surprises people. There is no taxpayer backstop. Flood Re’s funding FAQ says that if claims ever exceeded the limit, the insurers concerned would remain liable. The state created the scheme by statute but does not stand behind its losses.

The prices are moving at the lower end. In July 2026, as the scheme marked its tenth year, Insurance Business UK reported that from April 2027 the contents-only premium for Bands A and B would fall from £52 to £25, a change aimed at lower-income households and many tenants. The same report headlined the rising cost for Bands G and H, which shows where the pressure sits.

Which homes the Flood Re scheme covers

Eligibility is defined by the property, not by the person. Flood Re’s eligibility criteria list the conditions a home must meet:

• used for private, residential purposes, whether owner-occupied or rented;
• in domestic Council Tax bands A to H, or the equivalent;
• built before 1 January 2009;
• a single residential unit, or a building of two or three residential units, including leasehold blocks of three units or fewer where the freeholder lives in one of them;
• located in England, Wales, Scotland or Northern Ireland.

The exclusions are just as specific. Blocks of more than three flats are out. So are bed-and-breakfasts paying business rates, company-owned houses and flats, contingent buildings policies such as those held by banks, farm outbuildings, portfolio and commercial-income blocks, multi-use properties under commercial or private ownership, and commercial static caravan sites. Housing association and social housing buildings are excluded, but tenants’ contents in them can be eligible.

The 2009 cut-off is the rule that catches most people by surprise. A house finished in 2010 on the edge of a floodplain gets no help from the scheme, however high its risk. The reasoning is that planning rules and building standards should keep new homes out of harm’s way, and that buyers of new homes should not be cross-subsidised by everyone else. Whether planning has actually achieved that is a separate argument.

Flood Re reported an ultimate policy count of 353,000 at 31 March 2026, up from 346,200 a year earlier, and more than 742,000 properties ceded at some point since 2016. The same report says that 96% of high-risk householders can get quotes from 15 or more insurers. That last figure is the scheme’s own measure of success: the point was never only that flood cover exists, but that people in high-risk areas can shop around for it like anyone else.

Buying home insurance for flood risk areas

For a household, the practical question is how to find home insurance for flood risk areas when the property has flooded before or sits on a mapped flood zone. The answer is less dramatic than many people expect, at least for eligible homes.

Start with the risk itself. The GOV.UK service to check the long term flood risk for an area in England rates risk from rivers and the sea, surface water, reservoirs and groundwater as high, medium, low or very low, and since an update on 28 January 2025 it also shows possible flood depths and how risk may change with climate change. It describes an area, not an individual property, but insurers use similar data, so it is worth knowing what they will see. The guide to checking long term flood risk walks through the service step by step, and the overview of flood risk maps covers Wales, Scotland and Northern Ireland.

Then check eligibility against the list above: build date, Council Tax band, number of units, residential use. If the home qualifies, the insurer can cede its flood risk to Flood Re, and the flood element of the premium no longer reflects the address. What the customer pays is still set by the insurer, and it includes the insurer’s own costs and the other risks on the policy, such as fire, theft and escape of water. Flood Re home insurance, as people often call it, is therefore not a separate product. It is a normal policy whose flood part has been reinsured.

A few points that come up repeatedly when people look for home insurance for flood risk areas:

1. Not every insurer uses the scheme for every customer. Cession is the insurer’s choice, so prices for the same house can still differ a lot between companies. Comparing several quotes, or using a broker, matters more for a high-risk home than for an average one.
2. Disclosure still matters. Insurers ask about previous floods. Leaving one out can cause serious problems at claim time, and Flood Re does not change that.
3. The excess is separate from the premium. Policies on high-risk homes can carry a higher flood excess set by the insurer. The £250 excess in Flood Re’s own rules applies between Flood Re and the insurer.
4. Resilience work can help at renewal. Flood doors, raised sockets and water-resistant floors do not change the Flood Re premium, but they can reduce the cost and disruption of a claim, which insurers notice.

The site’s guide to home insurance in flood risk areas covers the buying process in more detail, including what to do if a home falls outside the scheme.

Worked example: how a policy is ceded

Take two hypothetical houses on the same street, both on a river floodplain in England, both at high risk on the Environment Agency’s map.

The first is a 1960s terraced house in Council Tax Band A, owner-occupied. The owner asks an insurer for buildings and contents cover. The insurer’s own model prices the flood risk at a level the owner could never afford, so it cedes the flood element to Flood Re. For the 2026/27 year, the insurer pays Flood Re the Band A premium of £205 for combined buildings and contents cover. The owner pays the insurer a premium that covers that cost plus everything else on the policy. The owner may never know the flood risk has been ceded: from the outside, Flood Re home insurance looks exactly like any other policy, with the same documents and the same claims line.

That winter the river overtops. The owner calls the insurer, not Flood Re. The insurer’s loss adjuster visits, the insurer pays for drying, repairs and replaced contents under the policy terms, and the insurer then recovers the flood claim from Flood Re, less the £250 excess per claim in the scheme’s rules. If the insurer offers Build Back Better, the repair can include up to £10,000 for flood resilience measures, also recovered from Flood Re.

The second house is a detached home on the same street, completed in 2011. It fails the build-date test. Its owner gets flood cover only if an insurer is willing to price it on the risk, and the premium reflects that. Same river, same street, a completely different insurance position. That contrast, more than any statistic, is what the Flood Re scheme does and does not do.

Change the first house to Band H, a large detached property elsewhere on the floodplain, and the ceded premium becomes £1,613. The insurer still cedes it, but Flood Re is now collecting a much larger sum for a home that also carries a much larger potential claim. The annual report’s warning that higher-value homes take a disproportionate share of the scheme’s exposure is about exactly these cases.

Build Back Better

A standard flood repair puts a house back the way it was, ready to flood again in the same way. Build Back Better was designed to change that for ceded policies. Since 2022 Flood Re has sponsored up to £10,000 per claim for property flood resilience measures installed during the repair. According to the 2025-26 annual report, more than 70% of the residential market offers it.

The money goes on measures such as flood doors and barriers, non-return valves, raised electrics or water-resistant floors. The aim is that the next flood costs less and empties the house for weeks instead of months. The annual report also notes that take-up of resilience measures is inconsistent, even where the offer exists. A grant that must be requested in the middle of a stressful claim is easy to miss.

Claims and reinsurance since 2024

Claims on the scheme vary a great deal from year to year. Flood Re reported claims of £159.6m for the year to 31 March 2025, above its average, with a rise in very large claims of more than £100,000 and more than £1m. Its 2025/26 annual report describes the following year as relatively benign, with only Storm Chandra and Storm Claudia of note.

Two changes in how the scheme manages that volatility are worth knowing. Flood Re made its first mid-year premium adjustment, effective 1 October 2025. And according to its 2025/26 annual report, a £3.2bn flood loss would now leave Flood Re retaining about £347m, against about £130m under the earlier arrangement. The reinsurance programme still protects the full liability limit, and the scheme placed its first catastrophe bond in March 2025.

The road to 2039

Flood Re is supposed to make itself unnecessary. The House of Commons Library describes the plan as a transition to risk-reflective pricing by 2039, with the scheme closing at that point. The mechanisms that are meant to get there include resilience work like Build Back Better, gradual changes to Flood Re’s own pricing, and better information about the flood risk of individual homes.

That last strand is where the July 2026 reforms point. Insurance Business UK reported that Flood Performance Certificates are to be piloted, with the aim of describing how well an individual home copes with flooding. The report did not set out how the ratings would be calculated. If buyers, lenders and insurers start to price resilience, the market could reward owners who invest in it, which is one of the conditions for a clean exit.

The timetable is not the only question. Flood Re’s board writes in the 2025-26 annual report that the pressures on the scheme are “structural rather than cyclical”: more exposure concentrated in higher-value homes, more very large claims and a ceiling on growth set by how much reinsurance the market will sell. The 2025-26 year was described as relatively benign, with claims from only two named storms, Chandra and Claudia, but one quiet year says little about the next decade.

Where the criticism lands

Supporters and critics of Flood Re agree on more than might be expected. Few dispute that it made flood cover available to hundreds of thousands of homes that would otherwise have struggled. The disagreements are about who is left out and what happens next.

Eligibility gaps. Homes built after 2008, blocks of more than three flats, housing association buildings and all businesses are outside the scheme. For small firms the gap is real. Some brokers now offer parametric flood cover such as FloodFlash, marketed through Marsh Commercial, which uses a sensor on the building and pays an agreed amount once water reaches a chosen depth. It is aimed at exactly the businesses Flood Re does not cover. The page on parametric insurance explains how such triggers work.

Cross-subsidy. The levy is a charge on every policyholder in the country. Most of them live far from any river and pay towards the cover of a minority who do. Supporters see that as a fair spreading of a shared risk. Others see it as a hidden tax that weakens the incentive to stop building and living in exposed places.

The cliff edge. Flood Re’s own annual report concedes that without the scheme many supported households would face sharp price rises or no cover. If that is still true in the late 2030s, the 2039 exit date will be hard to keep.

Resilience take-up. Build Back Better is widely offered but not consistently used. A transition that depends on homes becoming more resilient needs that to change.

No state backstop. For some observers this is a strength: taxpayers are not exposed. For others it is a weakness, because a loss above £3.2bn falls back on insurers in a way nobody has had to test. France’s CCR, by contrast, has called on its unlimited State guarantee only once since 1982, as the CatNat page explains, but the guarantee is there.

The 2025-26 annual report does not resolve any of these arguments. It does show a scheme that is growing, buying more protection for itself and trying to move prices for the lowest bands down while the cost of the top bands goes up. The next Transition Plan, due under the five-year cycle set by the Water Act, will be the first to show whether 2039 is still a realistic date or a hope.