How the Climate Crisis is Impacting the UK Property Insurance Market
Storms Cause Huge Insurance Payouts
Other storms, including Storms Ciarán and Henk, contributed to insurers paying out £1.4 billion in property claims, marking a historic high. Flooding, storm damage, and subsidence were major contributors to these claims, with homeowners and businesses alike suffering significant financial losses CityAM AXA UK home page
The Growing Cost of Flood Damage
Flooding continues to be one of the most significant risks facing UK property owners. According to the Association of British Insurers (ABI), claims related to flooding and storm damage reached £573 million in 2023, a 36% increase from the previous year Home | ABI. The 2023-2024 storm season saw unprecedented rainfall, with some areas experiencing up to 20% more rain than in previous years due to human-caused climate change Imperial College London.
The insurance industry has had to adjust premiums to reflect this growing risk. By mid-2024, the average cost of home insurance had risen by 19% compared to 2023, with flood-prone areas facing even steeper increases CityAM.
Flood Re, a government-backed initiative that helps provide affordable flood insurance, has reported that a third of its claims since its inception in 2016 came in the 2023-2024 period Home | ABI.
Long-Term Implications for the Market
The combination of rising claims, more frequent extreme weather events, and increasing premiums is putting significant pressure on the UK property insurance market. According to an EY report, insurers have been paying out more in claims than they collect in premiums for several consecutive years, leading to financial losses CityAM.
The Met Office predicts that by 2070, UK winters could become up to 30% wetter and summers up to 60% drier, further amplifying the risk of both flooding and subsidence AXA UK home page. Insurers are increasingly calling for government intervention, including improved flood defences and stricter planning regulations to prevent building in high-risk areas Home | ABI.
Conclusion
The climate crisis is having a profound impact on the UK property insurance market, with 2023 and 2024 serving as stark reminders of the financial risks posed by extreme weather. As storm and flood damage claims continue to rise, homeowners and businesses face the dual challenge of increasing premiums and reduced coverage options. Without significant investment in climate resilience, the market will likely continue to face growing instability in the coming years.
For more detailed insights, refer to the Association of British Insurers and Imperial College London’s Grantham Institute.
