Flood Re’s Reinsurance Costs Surge on UK Claims Frequency and Severity

Flood Re, a joint initiative between the UK government and insurers designed to make flood cover more affordable for homeowners, has reported a precipitous increase in reinsurance rates and claims costs.

“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 [US$134,061] and even £1 million [US$1.34 million],” said Flood Re in a statement.

These claims trends have brought a £100 million (US$134.1 million) increase in the scheme’s annual reinsurance costs while “the amount of risk that it retains directly has nearly tripled,” Flood Re added.

Now in its 10^th year, Flood Re said it 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, which is the highest on record.

Flood Re attributed the growth to climate change which is “fundamentally altering the reinsurance landscape.”

As a result, the scheme must evolve in order to remain sustainable for the future, it continued.

“The world Flood Re was designed for – one of predictable weather patterns, modest claims and accessible reinsurance – is rapidly disappearing,” commented Perry Thomas, CEO of Flood Re, in a statement. “Climate change has reshaped the risk environment, driving up costs and amplifying our exposure.”

Thomas said the scheme’s evolution must include revisiting how it is funded, how premiums are structured and which properties it should cover.

(Editor’s note: Flood Re currently reinsures homeowners flood risks but not commercial risks).

“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,” he said.

Key Flood Re figures for the year to March 31, 2025 include:

• 346,200 policies ceded to Flood Re (up 20%),
• £13.5 million (US$18.1 million) profit before tax,
• £159.6 million (US$214 million) in claims paid – above average but down from 2023/24,
• Reinsurance liability limit raised to £3.2 billion (US$4.3 billion),
• Net retention increased to £347 million (US$465.2 million) under 2025-2028 program (£130 million under 2022-2025 program),
• 99% of high-risk households can now access quotes from 15 or more insurers.

Source: Flood Re

Photograph: Residents wade through flood water in Loughborough, Leicestershire after rain and strong winds from Storm Henk lashed large parts of the UK, Wednesday Jan. 3, 2024. (Callum Parke/PA via AP)

Topics Claims Flood Reinsurance