Flood Re, the UK's government-backed flood reinsurance scheme, is seeking expanded powers to cap claims and raise premiums beyond inflation after becoming overwhelmed by expensive properties. Chief executive Perry Thomas told the Financial Times that the current system is 'regressive,' with lower-value homes effectively subsidizing high-end flood claims through a levy on all home insurance policies.

The scheme now covers 346,200 policies, up 20 per cent from last year and more than double its 2020 volume. However, much of this growth came from higher-value properties, creating an imbalance where the top two tax bands receive disproportionate payouts. In three of the past four years, Flood Re spent more on these premium properties—representing less than 4 per cent of UK homes—than on bands A and B, which comprise about 45 per cent of the market.

Thomas pointed to a £3mn claim for a River Mersey property that flooded in 2015, covering restoration of luxury amenities including an indoor pool, gymnasium, and five-a-side football pitch. These escalating costs pose credit risks to the UK, Moody's warned, especially if Flood Re shuts down in 2039 while still covering substantial properties. The government supports expanding Flood Re's authority, though legislative changes would be required.

To address affordability, Flood Re plans to reduce contents-only cover costs for bands A and B while encouraging flood-proofing through discounted premiums. Thomas argues the scheme wasn't designed for frequent rainfall events, which lack the market failure justification for reinsurance support.