Insurance industry in the UK urges expansion of coverage against extreme weather events
In the face of escalating costs due to climate change and extreme weather events, the UK is taking proactive measures to safeguard the insurance industry and the built environment.
The Association of British Insurers (ABI) underscores the significance of property maintenance, with claimants responsible for the home's condition prior to repair. This emphasis on responsibility is crucial as the UK insurance sector grapples with rising costs due to an increase in flood events, problems caused by climate change, and adverse weather conditions.
In 2024, the insurance industry paid £585m for weather-related damages to homes and possessions, a figure that underscores the need for effective measures. One such measure is Flood Re's reinsurance strategy, which involves entering the catastrophe bond market to secure additional reinsurance capacity. This move is essential for responding to increased climate risks and ensuring the affordability of insurance for flood-prone areas.
The UK government's pledge to build 1.5 million homes in the next five years is seen as a "crucial step" in building climate resilience by the ABI. Every new house must be able to withstand flooding, extreme heat, stronger winds, and subsidence, and should not be built in flood-risk areas.
However, consumers who live in newly built property on flood-risk land may face higher insurance costs, as only properties built prior to 2009 fall under Flood Re's jurisdiction. Flood Re, a government scheme, is calling for further investment into flood protection by the government.
The UK Green Building Council (UKGBC) has emphasized the need to adapt buildings to mitigate the effects of rising temperatures and extreme weather. Recommendations include installing solar shading devices and replacing conventional glass with solar glass to enhance resilience against heatwaves and flooding.
The Bank of England has highlighted the importance of managing climate risks in the financial sector, with a particular focus on addressing the vulnerability of commercial properties, which are not covered by initiatives like Flood Re.
Collaboration between insurers and organizations like the ABI is key to ensuring that insurance remains accessible and effective as climate risks escalate. Adam Holland, Head of Product at AXA Retail, emphasizes the importance of improving a property's flood resilience to keep the expense of flood-related damage to a minimum.
Kelly Ostler-Coyle, Director of Corporate Affairs at Flood Re, stated that the increasing frequency and severity of flooding events driven by climate change is placing unprecedented pressure on UK insurers. It's vital to protect vulnerable communities from potential flood risk, according to Adam Holland.
The UK government recently pledged £4.2bn for flood defence over the next three years, a move that underscores the government's commitment to climate resilience. These measures aim to enhance the resilience of both the insurance industry and the built environment against the increasing impacts of climate change.
- The Association of British Insurers (ABI) stresses the importance of property maintenance, as claimants are responsible for the condition of their home before repairs.
- In order to respond to increased climate risks and ensure the affordability of insurance for flood-prone areas, the insurance industry's reinsurance strategy, like Flood Re's, involves entering the catastrophe bond market to secure additional reinsurance capacity.
- As the UK government pledges to build 1.5 million homes in the next five years, the ABI sees this as a crucial step in building climate resilience, ensuring new houses can withstand flooding, extreme heat, stronger winds, and subsidence.
- To protect vulnerable communities from potential flood risk and mitigate the effects of climate change on buildings, there needs to be collaboration between insurers, organizations like the ABI, and financial institutions, as highlighted by the Bank of England and AXA Retail's Adam Holland.
