Flood Re enters new phase as climate change transforms risk landscape

Scheme delivers record support to UK households as reinsurance costs surge and Scheme exposure grows.

Flood Re, the UK government-backed insurance industry-funded scheme aimed at improving the availability and affordability of flood insurance, has today published its Annual Report and Accounts for the year ending 31 March 2025. The results show continued operational strength and delivery of the Scheme’s core purpose – making flood insurance more affordable and accessible – whilst also sounding a clear warning: climate change is fundamentally altering the reinsurance landscape and the Scheme must evolve to remain fit for the future.

Now in its tenth year, Flood Re has helped more than 660,000 households secure cover to date. In 2024/25 alone, the number of policies ceded to the Scheme rose by 20% to 346,200 – the highest on record. But this growth reflects a rapidly changing risk environment. The global cost of reinsurance is increasing and Flood Re is facing more frequent and severe claims – including a rise in very large claims exceeding £100,000 and even £1 million. The result is that the Scheme’s annual reinsurance costs have risen by £100 million, whilst the amount of risk that it retains directly has nearly tripled.

This backdrop has strengthened the case for further reforms to ensure that the Scheme remains sustainable in the long term. Changes that may be required include premium adjustments, reforms to the Scheme funding model and the scope of properties covered. Flood Re is committed to finding the right balance between these necessary reforms, working hand in hand with government and the insurance industry.

Key figures – Year to 31 March 2025:

• 346,200 policies ceded to Flood Re (up 20%)
• £13.5 million profit before tax 
• £159.6 million in claims paid – above average but down from 2023/24
• The Solvency Capital Ratio 235% in 2025.
• Reinsurance liability limit raised to £3.2bn
• Net retention increased to £347m under 2025-2028 programme (£130m under 2022-2025 programme)
• 99% of high-risk households can now access quotes from 15 or more insurers
• Over 70% of the market now offers Build Back Better

To protect its financial stability, Flood Re has already introduced a number of significant changes. In March, it launched its first catastrophe bond – “Vision 2039” – enabling access to insurance-linked securities markets and further diversifying its reinsurance strategy. It also agreed a new three-year funding arrangement with the government, increasing Levy I from £135 million to £160 million. In response to mounting cost pressures, the Scheme announced a mid-year premium adjustment – the first in its history – which will take effect from 1 October 2025. At the same time, the Scheme’s statutory loss limit was increased from £100 million to £250 million.

Perry Thomas, CEO of Flood Re, said: “The world Flood Re was designed for – one of predictable weather patterns, modest claims and accessible reinsurance – is rapidly disappearing. Climate change has reshaped the risk environment, driving up costs and amplifying our exposure. In response, we must urgently consider how the Scheme itself needs to evolve. This includes revisiting how it is funded, how premiums are structured and which properties it should cover. These are complex but essential discussions if we are to preserve the availability and affordability of flood insurance for the long term. Bold action now will be critical to ensuring the Scheme’s sustainability through to its planned conclusion in 2039.”

Flood Re is also calling for a co-ordinated national effort to strengthen the UK’s long-term flood resilience. Central to this is sustained government investment in defences, with £6.85 billion committed through to 2029. Alongside infrastructure, household-level adaptation is critical. Flood Re’s Build Back Better scheme – now supported by over 70% of the residential property insurance market – enables homeowners to access up to £10,000 in funding for resilience measures following a flood. The recently launched Flood Performance Certificate (FPC) roadmap further empowers individuals to understand and reduce their own flood risk. In a year of political transition, Flood Re has continued to work closely with Defra, the Flood Resilience Taskforce and the newly commissioned Bonfield Review into Property Flood Resilience to align physical adaptation with financial protection.

Bridget Rosewell CBE, Chair of Flood Re, added: “We are proud of the role that Flood Re has played in protecting UK households – and of the innovation and resilience shown this year. But looking ahead, there are tough choices. Climate risk is growing, reinsurance conditions are tighter and affordability is under threat. If we want to preserve the benefits that Flood Re has delivered, we must be bold, collaborative and forward-thinking. The decisions that we make now will shape flood insurance for decades to come.”