I’m worried about insurance.
The climate crisis is making some homes nearly impossible to insure. This should be a concern for everyone, even if your home feels safe right now. Without insurance, homeowners risk losing everything in a disaster, like a flood or wildfire. But the impact goes beyond individual homes. Insurance is essential for economies; without it, loans fail, and financial systems can collapse. As we face climate change, insurance becomes a key player in protecting our assets and lives.
Felicity Alvey from the University of Cambridge’s Institute for Sustainability Leadership notes, “More frequent and severe extreme weather events are affecting insurance claims and pricing everywhere.” This is a global issue.
In the U.S., rising climate risks have driven up insurance costs, especially in the West and South. Insurers are pulling out, leaving state-backed programs to handle the burden. For instance, California’s Fair Plan has seen its coverage increase by 230% since 2022, reaching $724 billion. In Europe, Spain and Portugal had to allocate billions for disaster recovery after severe storms. Even the UK is not spared, with a village in Cornwall facing 50 days straight of rain, leading to what are called “mortgage prisoners.” These are homeowners unable to sell because their properties are too risky to insure.
The crisis is set to worsen. Scientists predict a 25% increase in flood risk for millions living near China’s Pearl River delta by 2035, even with reduced carbon emissions. This situation is not just personal; it poses a societal risk. Alvey emphasizes, “Insurance provides financial stability during shocks, helping people continue their lives.”
Leading insurers express dire warnings about the future. Günther Thallinger of Allianz SE stated that the climate crisis might threaten capitalism itself, rendering entire regions uninsurable. Furthermore, the International Association of Insurance Supervisors highlighted the potential for systemic risk if insurability declines, leading to financial instability.
This domino effect hints at a broader economic meltdown, where insurance collapses lead to bank failures and investment withdrawals, leaving governments to address the fallout. A recent example in Wales demonstrates this concerning trend: a local council had to buy out 16 homes that could no longer withstand flooding.
The emotional toll of disasters is also significant. Many flood victims experience lasting trauma, often feeling anxious whenever it rains.
Is there hope? The UK’s Flood Re program offers a lifeline by keeping premiums manageable for those in flood-prone areas. Since its launch in 2016, it has aided over 600,000 homes. However, concerns grow as Flood Re is set to expire in 2039. Tracey Garrett from the National Flood Forum cautions that many homes could become uninsurable, warning, “We’re storing up a massive problem.”
In light of this, the next decade looks crucial. Flood Re’s leadership emphasizes the need to promote resilience and quicker recovery from floods. This includes practical steps like using self-closing air bricks and elevating electrical systems to mitigate damage. Everyone—from the government to local councils—has a role in adapting to a world increasingly affected by flooding.
Globally, many still lack access to affordable insurance, even as climate risks grow. Programs like the Insurance Development Forum have begun to bridge this gap, providing protection to millions. But much work remains.
Insurers are experts at assessing risk. When they warn that climate change could make insurance unaffordable, their message should serve as a wake-up call. It’s time to take action and rethink how we protect ourselves from an uncertain future.
For further insights, you can explore resources like the Insurance Development Forum.
