Flood Insurance: Reform of Flood Re

Nusrat Ghani Excerpts

Wednesday 1st July 2026 Commons Chamber

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

I welcome the opportunity to update the House on the reforms that Flood Re is announcing today, with the support of this Government. The changes will ensure that Flood Re remains fair, sustainable and focused on those who need it most, while supporting a transition to a more resilient insurance market by 2039.

Flood risk unites Members across this House. We all recognise the devastating impact that flooding has on people and communities and the importance of having access to affordable insurance. That is why this Government have put a record amount of investment into flood protections and simplified the funding rules. This year alone, we have unlocked £1.4 billion to enhance flood resilience across England, funding more than 600 projects and better protecting more than 70,000 properties from the devastating impacts of flooding. Despite that record investment, flooding is an ever-increasing risk.

Flood Re was established to manage a transition to prices that better reflect underlying flood risk and promote the affordability and availability of insurance. Since its launch, Flood Re has been a big success, and it is a strong example of Government and industry working together to address systemic risk—a partnership that started to be strengthened under a Labour Government after the 2007 floods.

Flood Re works by receiving a subsidy paid for by households that buy insurance. That money is used to purchase insurance so that households that would not be able to get insurance in an open market have affordable premiums. However, the context in which Flood Re operates has changed; rising claims, higher reinsurance costs and more properties being identified as at risk are placing increased pressure on the scheme.

We now have a perverse system in which money collected from all insurance customers, from all parts of the country and all income brackets, is flowing to the richest households in the country. That is not fair and needs to change. In three of the last four years, Flood Re has spent more on repairing homes in the most expensive council tax bands of G and H, which make up less than 4% of UK homes, than it has spent on repairing homes in council tax bands A and B, which make up around 45% of homes.

Let me give an example that shows why change is necessary. In 2025 a property near a river was flooded, resulting in a claim cost to Flood Re of more than £3 million. The property had very limited flood resilience measures in place, and the claim covered extensive restoration costs, including a quad garage, an indoor swimming pool, a jacuzzi and gym, a music room and den, a machinery storage unit, an outdoor astroturf padel court, and a five-a-side football pitch.

It is right that all properties are insured, but without reform of Flood Re, we will continue to have a system in which average-income and low-income households are subsidising flood insurance for the richest households in the country. That is why reform of Flood Re is needed—not to set a new policy direction, but to restore it to its original purpose. That is what we are doing.

First, Flood Re will work with insurers to reform its premium model so that support is better targeted. It will aim to make premiums as fair as possible across different council tax bands, regions and areas. Secondly, Flood Re will introduce a cap on the claims that insurers can pass to it, limiting payouts to an agreed level, with insurance companies covering the remainder. That will be worked out with Flood Re and insurers.

Thirdly, I have spoken to people who have lost everything through flooding and have been unable to afford contents insurance, so I am delighted that Flood Re is more than halving the premiums it charges to insurers for contents-only insurance for the 45% of homes in council tax bands A and B to £25 a year from April 2027. This Government are restoring fairness. We are making insurance affordable and helping with cost of living pressure. Finally, Flood Re will improve efficiency, make better use of its resources and reduce reliance on costly reinsurance while maintaining financial resilience.

However, to protect all homes from ongoing flood risk, we need more than just floor insurance and large flood defences; we need individual homes to become more flood resilient. That is why Flood Re will work with insurers and lenders to introduce flood performance certificates, helping households to better understand their flood risk and ensuring that if they take actions to make their homes more resilient, that is reflected in the cost of their premiums. That builds on the work of the recommendations in the “FloodReady” report. Flood Re will also strengthen incentives for Build Back Better, a UK home insurance sector initiative that, instead of simply restoring a home to a condition exactly as it was before, allows an additional £10,000 as part of the insurance claim to improve the flood resilience of the home.

These reforms will be implemented from 2028, with the reduction in contents premiums for council tax bands A and B taking effect from April 2027. Flood Re will keep the scheme’s eligibility criteria under review, including how it applies to leaseholders.

Under this Government, more homes are better protected from flooding than they were when we came into government. Our country will become more resilient to flooding as homes are incentivised to take action with flood performance certificates, and the 45% of people living in average-income and low-income households will be able to afford to protect their homes from the devastation of flooding. That is the difference that a Labour Government make, and I commend this statement to the House.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the shadow Minister.

--- Later in debate ---

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the Liberal Democrat spokesperson.

[Zöe Franklin (Guildford) (LD)]

I thank the Minister for advance sight of her statement.

We Liberal Democrats support the Flood Re scheme and the protection it provides, but we are concerned that the package still risks falling short in a few ways. We agree that it cannot be right for lower-income households to subsidise the most expensive properties. Targeting support more fairly is overdue, but fairness must also mean reducing costs at source, which means a far stronger focus on prevention. We are still spending billions reacting to floods rather than systematically reducing risk. Flood Re’s future must be tied more clearly to resilient homes, sustainable drainage, and a planning system that stops putting people in harm’s way in the first place. That includes progressing schemes such as Guildford’s flood alleviation scheme more quickly through greater Government support, which would protect homes and unlock sustainable brownfield development. Without doing this, we are merely rearranging who pays for failure.

The proposals on flood performance certificates and Build Back Better are welcome, but they remain incremental. We need a step change—embedding resilience upgrades as standard, ensuring that insurers reward households that act, and bringing lenders fully into the framework. Serious gaps also remain: millions are excluded from Flood Re, including many leaseholders and those in homes built after 2009. If we are serious about fairness, those gaps must be addressed.

Finally, the transition to a risk-reflective market by 2039 cannot simply mean a cliff edge and higher premiums for those most exposed. Reform is needed, but it must be matched by ambition. Fairness, resilience and prevention must go hand in hand.

[Emma Hardy]

The hon. Lady is quite right to say that we need to take action on the risk of flooding. That is why this Government are putting the most money into flood protection and taking action against flooding of any Government ever. In our first year in government, we delivered 151 flood schemes, better protecting more than 24,000 homes; that was after we put £108 million into maintenance to restore and repair our flood defences, many of which were in a poor condition. We are also putting £300 million into natural flood management—again, the most money any Government have ever put in. We have put in another £30 million for coastal adaption, and we have reformed the flood funding formula to ensure that it gives proper weight to deprivation, so that the communities that are most affected by flooding and least able to recover have more support. Total funding for internal drainage boards is £91 million, so I think we have ticked the box for “Have this Government put their money where their mouth is when it comes to protecting our country from flooding?”

We have not only done that; we are also looking at sustainable urban drainage systems and at introducing flood performance certificates, so that we can reward homes that have become more resilient to flooding. We are also looking at a fundamental change to how we address resilience and flooding as a country. When flooding happens, the people who go out there and do the work in the communities—whether local people, the Environment Agency or all the emergency services—deserve our absolute support, because the only thing I cannot protect this country against is climate change.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the Chair of the Environmental Audit Committee.

[Mr Toby Perkins (Chesterfield) (Lab)]

The 500 households in Chesterfield that were flooded during Storm Babet, almost all of which were in council tax bands A and B, will welcome the Government’s intention to make sure that this scheme remains sustainable. It is important to remember that flood victims are just that— victims. They are not the cause of their problems; they are victims of our global failure to take the requisite steps on climate change, and of previous Governments’ and the water industry’s under-investment in flood protection. The example that the Minister raised is obviously ridiculous, and there is a need for those at flood risk to take the action they can to protect their houses. What assessment have the Government made of how many households will see increases in their premiums as a result of the steps being taken? Can the Minister assure us that households will not be unable to get insured, leaving us in the position we were in before Flood Re existed?