Flood Risk and Home Insurance: What You Need to Know

For homeowners and prospective buyers, few topics generate more anxiety than the intersection of flood risk and home insurance. The fear of being unable to obtain cover, or of facing ruinous premiums, has historically been one of the most significant concerns associated with living in a flood-risk area.

The good news is that the insurance landscape has improved considerably since the introduction of Flood Re in 2016. But the system is not without its complexities, limitations, and ongoing uncertainties. This article provides a comprehensive guide to flood risk and home insurance in the UK, explaining how the system works, what it costs, and what you can do to protect yourself.

A Brief History

To understand the current system, it helps to know how we got here.

The Gentleman’s Agreement (1961-2000)

For much of the late twentieth century, flood insurance in the UK operated under an informal arrangement between the government and the insurance industry. The government agreed to invest in flood defences, and in return, the insurance industry agreed to make flood cover available as a standard part of home insurance policies.

This arrangement worked reasonably well while the frequency and severity of flooding remained manageable. But by the late 1990s and early 2000s, a combination of factors was putting it under strain:

• Major flood events in 1998, 2000, and 2003 generated large insurance claims
• Climate change projections suggested that flooding would become more frequent and more severe
• Increasing development in flood-risk areas was adding to the exposure
• Improved flood mapping was revealing the true extent of flood risk

The Statement of Principles (2000-2016)

In 2000, the Association of British Insurers (ABI) and the government agreed a “Statement of Principles on the Provision of Flood Insurance.” Under this agreement, insurers committed to continue offering flood cover to existing domestic properties, provided that the government continued to invest in flood defences and did not permit inappropriate development in flood-risk areas.

The Statement of Principles had important limitations. It only covered existing customers, not new applicants. It did not guarantee affordable premiums. And it excluded properties built after 1 January 2009 — the date was chosen to incentivise flood-resilient design in new developments.

As flooding worsened — particularly the devastating events of summer 2007 and winter 2013/14 — the limitations of the Statement of Principles became increasingly apparent. Some homeowners were being quoted flood insurance premiums of GBP 5,000 to GBP 10,000 per year, or were unable to obtain cover at any price. Properties were becoming effectively unsaleable.

Flood Re (2016-present)

Flood Re was established by the Water Act 2014 and began operating on 4 April 2016. It is a reinsurance scheme — a fund that sits behind individual insurers and absorbs the flood element of claims on qualifying policies.

The scheme is funded by a levy on all home insurers (currently GBP 135 million per year, passed on to all policyholders through a small addition to premiums), plus the premiums ceded to Flood Re by participating insurers.

How Flood Re Works

The Mechanism

When you buy a home insurance policy from a participating insurer, the insurer can choose to “cede” the flood risk element to Flood Re. The insurer pays a premium to Flood Re based on the property’s council tax band, and in return, Flood Re covers the flood element of any claim on that policy.

This means the insurer’s flood risk exposure is limited and predictable, which allows them to offer the policy at a more affordable price.

The Premium Caps

Flood Re caps the premium that insurers pay for flood cover according to council tax band:

Council Tax Band	Flood Re Premium
A	GBP 46
B	GBP 69
C	GBP 115
D	GBP 161
E	GBP 230
F	GBP 322
G	GBP 414
H	GBP 498

These are the premiums that the insurer pays to Flood Re, not the premiums you pay for your policy. Your total premium will include the flood element, plus the cost of all other covered risks (fire, theft, storm damage, etc.), plus the insurer’s operating costs and profit margin.

In practice, Flood Re estimates that the average premium paid by high-risk households has fallen from over GBP 1,200 before the scheme to around GBP 340.

Eligibility

Flood Re eligibility is based on the property, not the policyholder. The criteria are:

Eligible:

• Residential properties in the UK
• Properties built before 1 January 2009
• Properties in council tax bands A to H
• Properties with three or fewer residential units

Not eligible:

• Properties built on or after 1 January 2009
• Commercial properties
• Properties with more than three residential units (e.g., blocks of flats with four or more units)
• Properties not in a council tax band (e.g., some mobile homes)
• Leasehold properties where the building insurance is arranged by the freeholder/managing agent and the building contains more than three units

The exclusion of properties built after 2009 is intentional. The policy rationale is that development approved after 2009 should have been designed with appropriate flood mitigation, as the planning policy framework (the NPPF and its predecessors) requires Flood Risk Assessments and appropriate mitigation for development in flood-risk areas. If the development was designed correctly, the residual flood risk should be insurable on the open market without the Flood Re subsidy.

Participating Insurers

Flood Re reports that over 90% of home insurers participate in the scheme. However, participation is voluntary, and not all insurers choose to cede all eligible properties. Some insurers prefer to retain the flood risk themselves if they believe they can price it competitively.

When shopping for insurance, it is worth asking explicitly whether the insurer participates in Flood Re and whether the specific property would be ceded to the scheme.

Insurance for Properties Built After 2009

If your property was built on or after 1 January 2009, it does not qualify for Flood Re. This does not mean you cannot get flood insurance — it means you need to obtain it on the open market.

What to Expect

For properties built after 2009 that are in flood-risk areas, the insurance market can be more challenging:

• Premiums may be higher than for Flood Re-eligible properties
• Excesses (deductibles) may be larger — some insurers apply flood-specific excesses of GBP 2,500 to GBP 10,000 or more
• Fewer insurers may be willing to quote, reducing competition
• Some insurers may exclude flood cover entirely, offering a policy that covers everything except flooding

Mitigation Matters

For post-2009 properties, the design and construction of the development is the key factor. If the property was built in accordance with a properly approved Flood Risk Assessment, with appropriate finished floor levels, flood resilience measures, and safe access and egress, insurers should be willing to offer cover at a reasonable price.

Problems arise when:

• The property was built without an adequate FRA (which should not happen, but occasionally does)
• The flood mitigation measures are inadequate or poorly maintained
• The actual flood risk is higher than was anticipated when the development was approved

If you are buying a post-2009 property in a flood zone, ask to see the Flood Risk Assessment that was submitted with the planning application, and check whether the mitigation measures specified in the FRA were actually implemented.

Insurance for Leasehold Properties

The insurance position for leasehold properties — particularly flats — is more complex:

Buildings Insurance

For most leasehold properties, the buildings insurance is arranged by the freeholder or managing agent, and the cost is passed on to leaseholders through the service charge. If the building contains more than three residential units, it does not qualify for Flood Re.

This can create significant problems for leaseholders in flood-risk areas. The buildings insurance premium may be substantially higher than for a comparable building outside a flood zone, and the leaseholder has limited control over the insurance arrangements.

Contents Insurance

Leaseholders arrange their own contents insurance, and this should be eligible for Flood Re (provided the flat itself was built before 2009 and is in a council tax band). However, the contents insurance premium may still be elevated if the insurer is aware of the flood risk.

What to Do

If you are a leaseholder in a building with elevated flood insurance costs:

• Check whether the managing agent has obtained competitive quotes from multiple insurers
• Ask whether the insurer participates in Flood Re (remembering that the building may not be eligible if it contains more than three units)
• Consider whether the Right to Manage or other leaseholder remedies could give you more control over insurance arrangements
• Raise the issue at leaseholder meetings and AGMs

Making a Flood Insurance Claim

If your property is flooded, the claims process can be stressful and protracted. Understanding the process in advance can help:

Immediate Steps

1. Contact your insurer as soon as possible to report the flood
2. Document the damage with photographs and video before any clean-up begins
3. Do not dispose of damaged items until the loss adjuster has seen them (or the insurer has given permission)
4. Keep receipts for any emergency expenditure (e.g., temporary accommodation, essential repairs)
5. Contact your local authority — they may be able to provide emergency assistance

The Loss Adjuster

Your insurer will typically appoint a loss adjuster to assess the damage and agree the scope of the claim. The loss adjuster works for the insurer, not for you. If you are concerned that the loss adjuster’s assessment is inadequate, you have the right to appoint your own independent loss assessor, although this will be at your own cost.

Build Back Better

Since April 2022, Flood Re has included a “Build Back Better” provision that provides additional funding (up to GBP 10,000 per claim) for property flood resilience measures installed during the repair of a flood-damaged property. This is designed to break the cycle of repeated flooding and damage by ensuring that properties are made more resilient when they are repaired.

Eligible measures include:

• Flood-resistant doors and barriers
• Non-return valves on drainage connections
• Waterproof wall finishes below the design flood level
• Raised electrical installations
• Resilient flooring

The Build Back Better payment is made in addition to the standard claim settlement and is available for all Flood Re-eligible claims.

Typical Timescales

The timescale for resolving a flood insurance claim varies significantly depending on the severity of the flood and the extent of the damage. As a rough guide:

• Minor flooding (limited to ground floor, shallow depth): 2-4 months to full repair
• Moderate flooding (ground floor inundation, structural drying required): 6-12 months
• Severe flooding (deep inundation, significant structural damage): 12-24 months or more

During the repair period, your insurer should cover the cost of alternative accommodation if your home is uninhabitable.

Reducing Your Insurance Costs

There are several practical steps you can take to reduce your flood insurance premiums:

Install Property Flood Resilience Measures

Insurers increasingly recognise Property Flood Resilience (PFR) measures when pricing policies. Measures that can help reduce premiums include:

• Flood doors and barriers
• Non-return valves
• Waterproof plaster and tanking
• Raised electrical installations
• Resilient flooring

The British Standard BS 851188:2021 provides guidance on the assessment and installation of PFR measures, and some insurers will offer premium reductions for properties with measures that comply with this standard.

Obtain a Flood Risk Assessment

A site-specific Flood Risk Assessment can demonstrate that the actual risk to your property is lower than the broad-scale mapping suggests. This can be particularly valuable where:

• The property is elevated above the surrounding flood level
• The property benefits from flood defences not captured in the national mapping
• The property is in Flood Zone 2 or 3 but the actual risk is at the lower end of the range

Provide the FRA to your insurer — they may use it to reassess the risk and reduce your premium.

Shop Around

The insurance market for flood-risk properties is more competitive than it was before Flood Re. Obtain quotes from multiple insurers and brokers, including specialist flood insurance brokers. The difference between the cheapest and most expensive quote can be significant.

Increase Your Excess

Accepting a higher excess (deductible) can reduce your premium. However, make sure you can afford to pay the excess if you need to make a claim. A GBP 5,000 excess may look attractive until you actually need to find GBP 5,000 after a flood.

Combine Buildings and Contents

Some insurers offer better rates if you combine buildings and contents insurance in a single policy. This is not always the case, but it is worth checking.

The Future of Flood Insurance

Flood Re’s Transition

Flood Re is designed to operate until 2039, after which the insurance industry is expected to price flood risk affordably on the open market. The Flood Re Transition Plan sets out how this will be achieved, including:

• Encouraging investment in property flood resilience through Build Back Better
• Working with government to reduce flood risk through better planning and flood defence investment
• Improving the industry’s ability to price flood risk accurately using better data and modelling
• Gradually increasing Flood Re premiums to bridge the gap between subsidised and market rates

Whether this transition will be smooth remains to be seen. Climate change is increasing flood risk, and the costs of flood damage are rising. There is a risk that the gap between Flood Re premiums and market rates will widen rather than narrow.

Climate Change

Climate change is expected to increase the frequency and severity of flooding across the UK. The Environment Agency’s climate change allowances project significant increases in peak rainfall intensity, peak river flows, and sea levels. This will increase both the number of properties at risk and the expected annual cost of flood damage.

For the insurance industry, this means that flood risk will become an increasingly important factor in pricing. For homeowners, it means that flood insurance costs may rise over time, even with Flood Re in place.

Data and Technology

Improved data and modelling are transforming the way insurers assess flood risk. High-resolution surface water flood maps, property-level risk assessments, and real-time weather data are all enabling more accurate and granular pricing.

This is generally positive — it means that properties at low actual risk can benefit from lower premiums, even if they are technically within a flood zone. But it also means that properties at genuinely high risk may face higher premiums as the pricing becomes more accurate.

Conclusion

The flood insurance landscape in the UK is in better shape than it was a decade ago, largely thanks to Flood Re. Most residential properties built before 2009 can obtain affordable flood insurance, and the Build Back Better initiative is encouraging greater investment in property flood resilience.

However, challenges remain. Properties built after 2009, commercial properties, and larger leasehold buildings are not covered by Flood Re. Climate change is increasing flood risk. And the long-term transition from subsidised to market-rate flood insurance remains uncertain.

For homeowners and buyers, the key is to be informed, be prepared, and be proactive. Understand your flood risk, check your insurance position before committing to a purchase, invest in flood resilience measures where appropriate, and shop around for the best deal.

At Aegaea, we help homeowners and buyers understand their flood risk through professional Flood Risk Assessments. If you need clarity on the flood risk to your property, or evidence to support an insurance application, get in touch with our team.