Flood Re as a response to large-scale climate risk
Thinkpiece
Publication date:
04 April 2016
Last updated:
11 June 2025
Author(s):
Mark Hoban MP, Policy and Public Affairs
Flood Re is a flood 're-insurance' scheme to help support households at highest flood risk. Mark Hoban describes how the scheme works and how it is a temporary solution until the industry can develop more reflective pricing.
- No other country has sought to tackle the growing cost of flood damage in this way. There are other types of intervention to address natural catastrophes but no government or insurance sector has set up a privately funded and owned reinsurer for a single peril.
- There are two sources of income for Flood Re: a levy on household insurers of £180m per year; and a premium for each policy ceded to us which is capped by council tax band.
- By charging a fixed premium to the insurer in return for bearing the flood risk, that Flood Re will help create a competitive market as insurers are now able to compete on price, product and service knowing that Flood Re will cover the volatile flood risk.
- The arrangement has a finite life of 25 years at which point we will return to risk reflective pricing. Implicit in this is that the price of flood insurance will be affordable as well as risk reflective.
- To prepare for the end of Flood Re's mandate, the insurance sector needs to develop better methods for assessing flood risk so that spending on defences and resilience can be better targeted. Insurers and builders need to develop more cost effective ways to repair flooded homes. Flood Re can play its part with the most comprehensive map of insurers' assessment of flood risk.
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