Why the Insurance Industry Is Warning Against the NPPF Flood Risk Changes

In early March 2026, as the government's consultation on its revised National Planning Policy Framework drew to a close, seventeen of the most significant names in UK flood risk signed a single joint letter to ministers. Insurers, mortgage lenders, brokers and flood charities set out one shared concern, and the insurers' NPPF flood risk warning was blunt: a proposed change would let developers bypass the Sequential Test on land at high risk of surface water flooding, and if that safeguard goes, some new homes will end up uninsurable, and with that, unmortgageable and hard to sell.

For anyone bringing land forward, this is worth reading closely. It is not the usual objection from campaign groups. It comes from the people who price flood risk for a living, and from the lenders who decide whether a finished home can be bought at all. If a scheme is heading for land the maps show at surface water risk, that is a reason to test the flood risk position before the layout is fixed rather than after. That is what a flood risk assessment for planning exists to do.

The letter did not stop the change. The Framework published on 17 August 2026 kept the exemption as consulted on, now policy F5(2)(b)(ii), and on 29 September 2026 Aviva's chief executive, Amanda Blanc, told the BBC that England is building homes today that may become uninsurable. This article was updated on 29 September 2026 to cover both.

The letter was sent on 9 March 2026 to the Secretaries of State at both MHCLG and Defra, and signed by every major household insurer, the reinsurer that underpins the flood market and the trade body for mortgage lenders.

This is more than insurers

The striking thing about the letter is the breadth of who signed it. Sixteen organisations, seventeen individual signatories, one page. They span underwriting, reinsurance, broking, mortgage lending, flood charity work and planning policy, and several of them compete hard with each other in the market. When the scheme that underpins the flood insurance market and the body that represents mortgage lenders put their names to the same document, it is a signal from the whole property-risk chain, not lobbying by one trade.

• Insurers. The ABI, Aviva, Allianz, AXA, Zurich, Admiral, Ageas and Covea, signing at chief executive, chief underwriting officer and claims director level.
• Reinsurance. Flood Re, the scheme that keeps cover affordable for higher-risk homes, signed by its chief executive.
• Lending and broking. UK Finance for the mortgage lenders, and the British Insurance Brokers' Association.
• Flood recovery and policy. The National Flood Forum, Mary Long-Dhonau OBE, the International Property Flood Resilience Association, Marsh Risk and the Town and Country Planning Association.
• Public sector experience. Emma Howard Boyd, former Chair of the Environment Agency and now Chair of the London Climate Resilience Review.

The letter went to the Rt Hon Steve Reed MP and the Rt Hon Emma Reynolds MP, and opened by thanking both departments for their engagement through the National Flood Resilience Taskforce. It is a letter from people who work with government, not against it.

What the insurers are actually warning

The letter is unusually specific about cost. Insurers paid out £1.2 billion in weather-related property claims in 2025, up 14 per cent on the year before, with £758 million of that on damage to people's homes and possessions. Against that backdrop, the signatories set out why building in the wrong places stores up a bill someone eventually has to meet. 6.3 million homes in England are now at risk of flooding, 4.6 million of them from surface water alone, up from 5.5 million at the last national assessment in 2018.

A resilience package costs about £1,000 to build into a new home. The average flood payout in 2025 was £30,000. That ratio is the whole argument in one line.

Both halves of that ratio are worth understanding properly. The claims side is set out in detail in the guide to UK flood insurance claims, and the build side in property flood resilience. The short version: fitting resilience during construction is cheap, retrofitting it after a claim is not, and almost nothing in the planning system currently requires the first.

Worth saying where those numbers come from. The 6.3 million and 4.6 million figures are the Environment Agency's national flood risk assessment, not the industry's, and the same NaFRA2 assessment that underpins the government's own FloodReady action plan. The surface water share is what made the proposed change so contentious. Surface water is now the largest single source of flood risk in England, and it sits outside the Flood Zones that most planning decisions still turn on. A site can be squarely in Flood Zone 1 and still carry mapped surface water risk. That is the mismatch the letter is built on.

The letter also points to an ITV News investigation into planning breaches on new-build estates as a sign of what happens when development in high-risk areas goes unchecked. Ten estates were found to have breached their planning conditions after two floods in Northumberland prompted councils to look. For the detail of the policy changes themselves, see the breakdown of the December 2025 NPPF draft, the NPPF August 2026 changes as adopted, the guide to what the Sequential Test exemption for surface water actually requires, and the wider picture in surface water flooding and planning.

The real crunch: Flood Re, 2039 and the post-2009 gap

This is where the warning bites hardest, and it is the part most coverage skates over. Flood Re, the reinsurance scheme that keeps cover affordable for higher-risk homes, was always designed to end in 2039, a temporary 25-year measure with a private, risk-reflective market expected to take over from there. It has never covered homes built on or after 1 January 2009. That exclusion was deliberate: the scheme was not meant to subsidise new building in flood-prone places. The House of Commons Library briefing sets out the policy history, and Flood Re's July 2026 reform package commits it to piloting Flood Performance Certificates, with new-build homes named as a later stage of roll-out.

Put those two facts together and every new home in a flood-risk area is already outside the safety net. On day one. With no route back in.

1. The home completes after 1 January 2009, so it is excluded from Flood Re by the scheme's own eligibility rules. There is no application and no appeal; the build date decides it.
2. Cover therefore has to come from the open market at a risk-reflective price, which for a high surface water risk site can mean a high excess, a flood exclusion, or no offer at all.
3. A lender assessing the mortgage on a flood-risk property has to be satisfied the home is insurable for the life of the loan. Where it is not, the loan is refused or the terms tighten.
4. From 2039 the wider Flood Re backstop disappears for everyone, including the older homes around the new estate, and the comparison the market makes shifts again.

Relax the planning rules, the signatories argued, and the country drifts further from the point where an affordable, risk-reflective market could ever take over, leaving high-risk homes facing premiums owners cannot meet, or no cover at all. An uninsurable home is the practical definition of a stranded asset, and it is a pattern already visible in what flood risk does to house prices.

What the government says in reply

The government rejects the premise that new homes are being consented recklessly. Responding on 18 February 2026 to the Aviva research behind the one-in-nine figure, MHCLG argued the headline numbers are misleading because they do not account for flood defences, and pointed to its own compliance record: in 2024/25, 96 per cent of planning decisions complied with Environment Agency advice on flood risk, and 99 per cent of proposed new homes in planning applications complied with that advice.

Both things can be true. The compliance figures are real. They also measure the wrong thing, because compliance is counted against the advice of a consultee whose remit does not extend to the source of risk under discussion. Surface water sits with the Lead Local Flood Authority. So a 99 per cent compliance rate on the Environment Agency's river and coastal advice tells you very little about the source of risk now affecting 4.6 million homes, and that is precisely the gap the letter was written to point at.

The defences point is not one-sided either. Defended is not the same as safe. It means protected to a design standard, behind an asset that can be overtopped or fail, with a maintenance liability attached to somebody for the next hundred years. Underwriters price that residual risk because they have paid claims behind defences before. Planning decisions frequently treat the defence as the end of the matter. It is the same governance gap Aviva identified in its own analysis of planning and flood risk.

Did the final NPPF keep the surface water exemption?

Yes, unchanged. The National Planning Policy Framework published on 17 August 2026 replaced the December 2024 version and applies to decisions made from that date, including applications already in the system. The exemption the letter objected to is now policy F5(2)(b)(ii), in the Framework's new flood risk chapter. It removes the Sequential Test where a site-specific flood risk assessment "demonstrates clearly" that:

The government's response to the consultation, published the same day, records how the objection was weighed. It lists long-term insurability among the "less common points" respondents raised, then retains policies F5 and F6 as consulted on. Its answer to the surface water concern is that surface water is not exempt from the Sequential Test altogether: only sites at risk solely from surface water qualify, and only where the flood risk assessment shows the layout, design and mitigation keep the development safe for its lifetime without increasing risk elsewhere.

665 respondents answered the consultation question on policy F5. Just over half agreed with it, wholly or in part, and 24 per cent disagreed.

So the burden moved rather than disappeared. Before August, a surface water site went through the Sequential Test. Now it can skip the test, but only on the strength of the flood risk assessment, and the word "clearly" is the case officer's to apply. An assessment that gives surface water a risk band and a sentence loses the exemption, and the site is back in the Sequential Test with the application already submitted.

What has the insurance industry said since?

Aviva's chief executive, Amanda Blanc, returned to the subject in the BBC's Big Boss Interview, reported by BBC News on 29 September 2026. She said the risk of flooding is "absolutely increasing" and that England is "for sure" building homes that might be uninsurable at some point in the future. On current building patterns, she said, 115,000 new homes will be built in flood zones over the next decade.

The research behind the interview is Aviva's own:

• One in nine. The share of homes built between 2022 and 2024 at medium to high risk of flooding.
• Nearly a third. The share of homes built in 2024 expected to face some flood risk by 2050, with one in seven at medium to high risk.

Blanc also said that construction bordering flood zones needs a different approach, because a property can be built to be more or less vulnerable to flooding. That describes much of the ground policy F5(2)(b)(ii) now covers: sites outside the Flood Zones where surface water is the only mapped source of risk. The interview changes nothing in the planning position. It does show that the insurers who lost the argument in August have not changed their view of the risk. A consent obtained through the exemption is a planning decision, and the insurer quoting the finished home will make its own.

What this means for developers

It is tempting to read a letter from insurers as someone else's problem. It is not. The thread running through all of it is that flood risk has become a commercial risk to the scheme. A home that cannot be insured cannot, in practice, be mortgaged; a home that cannot be mortgaged cannot be sold. Surface water risk that a few years ago might have been parked as a drainage detail to settle by condition now reaches the saleability of the finished units, and it does so at the worst possible moment, once the money is spent.

The timing sharpens it. From April 2026, changes to the planning appeals process mean the appeal stage can no longer be relied on to rescue a weak flood risk assessment. Written representations now carry the great majority of decisions, allow only around 30 per cent of them, and generally shut out technical evidence that was not before the council, under SI 2026/122. The second bite has gone. What goes in with the application is the case.

Around 30 per cent of Section 78 appeals decided by written representations succeed, against roughly 61 per cent at hearing or inquiry — and written representations now carry the great majority of decisions.

• Test the site before the layout is fixed. A flood risk feasibility study on the land, ahead of the option or the acquisition, is far cheaper than redesigning around a surface water flow path at reserved matters.
• Make the Sequential Test engage with surface water properly, or evidence the exemption in full. A test that addresses river and coastal risk and treats surface water as a drainage matter is the exact gap the letter was aimed at. Where policy F5(2)(b)(ii) is relied on instead, the FRA has to demonstrate lifetime safety clearly, with depths, flow routes and floor levels on the page.
• Apply climate change allowances at the upper end. The lower climate change allowance is defensible on the day and indefensible over a 100-year design life, which is the period an insurer and a lender are both looking at.
• Design the drainage to the 2025 SuDS standards from the first sketch. Policy F8 of the August 2026 Framework now expects sustainable drainage to be designed to the National Standards. Retrofitting a compliant surface water drainage strategy at discharge of conditions is where programmes slip.
• Write the evidence for the conveyancing pack as well as the planning officer. The FRA and drainage strategy end up in front of a buyer's solicitor eventually, and that reader is looking for a reason to raise an enquiry rather than a reason to approve.

Insurance and planning ask different questions of the same site. A scheme can answer the planning question well and still fail the insurance one, and the second failure arrives years later, when the units are built and someone is trying to sell them. That is the practical case for looking at the flood risk position through both lenses before committing, whether through a Sequential and Exception Test report for the application or a flood risk assessment for insurance on the finished asset. Unda's NPPF flood risk guidance sets out what a compliant submission has to cover under the August 2026 Framework.

Unda's view

Unda supports the thrust of the coalition's letter. The case for siting development on the evidence, and designing properly for the water that lands on a site, is the one Unda makes to clients every week. Jackie Stone, Director at Unda, said when the letter was sent that the industry was right to raise the alarm while the rules were still being written, rather than after another decade of homes had gone up in the wrong places.

For Jackie, flood risk is no longer a box to tick late in the process. It has become a question of whether the finished homes can be sold and lived in at all.

For developers, that makes flood risk an early design decision rather than a late compliance check. The insurers' NPPF flood risk warning is, at bottom, a warning about timing. It did not settle the policy question: the final Framework kept the surface water exemption. What it does settle is who carries the cost if the policy goes the wrong way. It is not the people who wrote it.

Frequently asked questions

Planning a scheme on a site with flood or surface water risk? Unda prepares robust, policy-compliant Flood Risk Assessments and Sequential and Exception Test reports, with fixed fees and a quote back within 24 hours. Call +44 (0) 1293 214444 or email enquiries@unda.co.uk.