How the UK is keeping flood insurance affordable – until 2039
While floods are becoming more frequent in recent years, you should still be able to buy reasonably priced home insurance. That reassurance exists largely because of Flood Re. Launched in 2016, Flood Re is a national public–private reinsurance scheme that prevents many properties from being priced out of cover.
But the Flood Re scheme is a temporary fix that’s due to end in 2039, on the assumption that flood risk will fall and the market can move back towards more risk-reflective pricing. As financial experts, we’re worried that the UK may not be able to adapt its infrastructure and systems to climate change fast enough.
The success of the Flood Re scheme hinges on a shared contract between government, homeowners and insurers. Government has to cut risk through investment and delivery. Homeowners reduce damage by building back better and avoiding preventable exposure. And insurers must increase prices of premiums to better represent the climate risk but not so fast that cover becomes unaffordable.
If premiums rise too quickly, fewer households will stay insured and the ability to socialise risks across a large pool will not be possible.
The scale of the challenge is already clear. Flood Re was designed when a global temperature rise of 1.5°C still felt achievable and a 2°C increase should be a hard limit.
Climate change has accelerated since then. By around 2050, around 8 million properties in England, roughly one in four, could be at flood risk.
The House of Commons public accounts committee warns that deterioration in existing defences has left around 203,000 properties without reliable protection, while the government aims to protect 200,000 more by 2027. Labour’s target to deliver 1.5 million new homes in England by 2029 risks adding pressure by pushing development onto cheaper land that’s at greater risk of flooding.
Many countries intervene to support insurance for disasters such as floods and storms, but few put a firm end date on that support. For example, The US National Flood Insurance Program (NFIP) was created to provide affordable flood insurance and to reduce future damage by discouraging development in high-risk floodplains.
In practice, repeated extreme weather has left the NFIP in debt and subsidised premiums have weakened incentives to avoid building in flood-prone areas. Although the NFIP is regularly renewed by the US Congress, its long-term sustainability remains uncertain.
France’s catastrophes naturelles scheme (CAT-NAT) covers natural disaster losses that private insurers struggle to price, funded by a national surcharge. Rising losses from more frequent and severe disasters are straining the model, so the surcharge increased from 12% to 20% in January 2025. That raises a hard question: how can the system stay fair as the cost of disasters keeps climbing?
Preparing for post-2039
Our ongoing research suggests flood-related volatility can amplify financial stress and uncertainty. The choice is not simply between keeping Flood Re forever or ending the scheme. The real question is whether the UK can use the time Flood Re is buying to reduce risk fast enough to make a fair transition possible by 2039.
That is why progress needs to be visible and measurable in five areas.
First, as demonstrated by recent updates in England and Wales, flood maps and modelling must reflect current conditions and future climate risk, with updates that keep pace with changes to the drivers of flood risk whether that be from heavy rainfall or rivers and the sea.
Second, governance must be joined up, with clear responsibilities and minimum coordination standards across agencies for rivers, surface water, drainage and sewers. Better collaboration would help to resolve misalignments in major capital programmes across risk management authorities.
Third, drainage and surface water management must be strengthened, with clear rules and long-term maintenance so new development does not add to flood and sewer risk.
Also, every tool in the box should be used to increase investment in flood risk reduction and to enhance maintenance. The benefits of flood protection should be made transparent to insurers and fed into catastrophe models.
Finally, a clear Flood Re future must be shaped together by planners, insurers and flood authorities. This will help set a shared standard for flood risk management.
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Neil Gunn works and consults for Willis Towers Watson and also owns some shares in that company While the Willis research network supports scientific research through for example direct grants and in kind support, it benefits from schemes like CDTs which are supported by government funding
Dalu Zhang and Meilan Yan do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.