Flood Insurance: Reform of Flood Re

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.

I call the shadow Minister.

I thank the Minister for advance sight of her statement, and for our recent conversations about flooding in Somerset.

Flooding is a huge challenge for areas across the country. Some 6.3 million properties in England are currently located in areas that are at risk of flooding, including many in my constituency. When floods occur, the Environment Agency, local volunteer groups and farmers work to help people quickly, often in difficult circumstances. I was humbled and deeply proud to see the way the community pulled together in affected areas during the flooding earlier this year, particularly in Moorland and Fordgate. The Minister knows how seriously I take flooding, and has engaged with me following my requests for stronger national support, clearer local responsibilities, more dredging and improved pumping capacity.

The previous Conservative Government took real action to prevent flooding and protect homes and businesses, ensuring that over 600,000 properties were better protected from flooding and coastal erosion. Between 2015 and 2024, over 900,000 acres of farmland were also protected. In 2020 the previous Government announced a doubling of capital funding for flood defences in England, which rose to £5.6 billion from 2021 to 2027.

Flood Re was set up under the former Conservative Government, and it remains an important scheme to promote the availability and affordability of flood insurance for eligible homes. Its recent accounts report contains serious warnings for Ministers. Flood Re is clear that

I thank the hon. Gentleman, and I recognise his commitment to flood protection. He referenced our meeting, at which we discussed the £50 million that we are putting into Somerset because of its particular landscape and challenges. He is right to highlight the accounts that Flood Re has produced; without reform or change, we would be in a poor situation. Flood Re has been an amazing success, but to continue for the next 10 years, it needs to change. That is why we are introducing the changes that I have mentioned: targeting those who most need support by introducing a cap, making contents cover cheaper for lower council tax bands, and the work on the premium model. One of the other changes, which is probably not as eye-catching, is allowing Flood Re access to some of its trapped capital to make reinsurance costs cheaper. All of the reforms that Flood Re is introducing are intended to ensure that it is sustainable and keeps going.

Turning to continued support for flood protection, the hon. Gentleman will know that we have put the most money into flood protection of any Government ever, with £10.5 billion committed for the next 10 years. There are no current plans to include businesses because, as I said, Flood Re works by levying every insurance company; if we were to include businesses, we would be levying every business in the country to pay for it. For people in the top council tax bands, we are looking at flood performance certificates, so that if they can take action to improve the resilience of their home, that will be reflected in their premiums. We are doing some pilots, and I have been pushing insurance companies and others to get those pilots out the door as quickly as possible. We are not just looking at the top council tax bands; we are also looking at people in social housing to see how flood performance certificates could work.

I thank the Minister for her statement. The vital importance of protecting and insuring people against flooding is highlighted by the case of my constituents who live next to Thingwall allotments, where extensive surface water flooding has blighted their lives for four years. Residents of Abbeystead Road have been forced to continually use flood sacks, sandbags and pumps to protect their homes, and gardens have become unusable. I am particularly concerned about the welfare of elderly constituents in poor health and families with children. Despite my representations over the past four years, Liverpool city council and United Utilities have not resolved the issue; instead, the council is sending tankers to pump out the water, at what must be considerable cost. I have written to the Minister, and although I know she is extremely busy, will she meet me, residents, Liverpool city council and United Utilities to find a resolution once and for all?

My hon. Friend is right to highlight how difficult it is for people to continually have to take action, especially elderly people, as well as the mental health impact of thinking they are going to have to do something to try to protect their home every time it rains. I would be happy to help convene a meeting with all the relevant parties.

I call the Liberal Democrat spokesperson.

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.

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.

I call the Chair of the Environmental Audit Committee.

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?

I know how much my hon. Friend cares about this issue. Indeed, we have visited some of the areas in his constituency that have been flooded. I remember the devastating loss in his constituency prior to the election; he was out there on the frontline, helping to lead some of the flood recovery work.

On the impact of this change, we need to work carefully with insurers on Flood Re. We have said we will introduce the cap by 2028 to enable them to have the time to work through things carefully and properly. It is about fairness. Council tax bands G and H represent 4% of properties, yet they make up 20% of claims on Flood Re. We want to make this change in conjunction with insurers. Piloting the flood performance certificates will be so important, and that has to be done hand in hand with people. We want to incentivise people by saying, “If you take action to improve your home and make it more resilient to flooding, you will be rewarded with lower premiums.” We are trying to encourage people to do the right thing where they can, while recognising that there are people at other end of the scale—some of the people we have seen in my hon. Friend’s constituency—who are simply unable, for various reasons, to take action to improve the resilience of their own property. It is all about keeping things in balance.

In West Worcestershire we have the River Severn, the River Avon, the River Teme and many brooks, so flooding is a perennial issue. Over the years, we have built many new flood defence schemes. I thank the Minister personally for her role in the Severn Stoke scheme, which is currently under construction. Unfortunately, the Tenbury Wells scheme has been cancelled, and there will be individual property-level resilience in that town. Does the Minister have any advice for the town council, which is unable to get any insurance now? Will she consider changes to the Flood Re scheme to enable properties that have benefited from flood resilience measures to get access to Flood Re for their insurance?

I am pleased to be responding to the hon. Lady, because I think that the very first Adjournment debate I had as a Minister was with her and it was about flooding. It is nice that whenever I make a statement about flooding, I already know who will be in the room. I commend her on her tireless campaigning on this issue and the commitment she has shown to her constituents. I have been pleased to go and see those property flood resilience measures and the difference they have made to communities. Flood performance certificates will be piloted, and those communities are an example of where householders have taken measures—albeit in this case through the Environment Agency—to better protect their homes from flooding. When people do that, it should be reflected in their premiums, and there is not currently a way to do that. The system looks at postcodes and areas, and gives people a premium on that basis, but we want to make it more intelligent, so that it can recognise if someone has made their home more resilient to flooding—that should mean that they have cheaper premiums.

The Minister will be aware that I spent most of my career supporting the most vulnerable people in communities that had been flooded, and helping them to find ways to support their mental health. It is not unknown for many of them to have post-traumatic stress disorder post floods. That can be brought on by a number of triggers, including the sound of rain on the window or the anxiety of worrying about being able to insure a house post floods. The reduction of contents-only insurance to £25 a year for bands A and B will be transformative. Does the Minister agree that it will make such a difference in helping lower-income households and in ensuring that Flood Re protects the things that matter most to people?