Insurance claims from extreme weather are surging. The Association of British Insurers (the UK insurance and long-term savings trade body) reports<\/a> a record \u00a3585 million in home weather-damage payouts for 2024. <\/p>\n Climate change is driving more frequent and severe events, pushing traditional insurance models to their limits. Insurers are left with little choice<\/a> but to raise premiums sharply or withdraw coverage entirely. When insurance becomes unaffordable or unavailable, households are exposed, property values fall, mortgages become harder to secure, and the risk of a wider financial crisis grows.<\/p>\n Ever wondered how to spend or invest your money in ways that actually benefit people and planet? Or are you curious about the connection between insurance and the climate crisis? <\/p>\n Green Your Money<\/a> is a new series from the business and environment teams at The Conversation exploring how to make money really matter. Practical and accessible insights from financial experts in the know.<\/p>\n Our research into the insurance industry shows that UK resilience is falling behind. Policymakers in the UK tried to avert an insurance crisis by launching Flood Re in 2016, a joint scheme between government and insurers designed to keep insurance affordable for households in high-risk areas. It was meant as a temporary bridge, due to close in 2039 once stronger flood defences and better land-use planning are in place.<\/p>\n But progress has been painfully slow. In January 2024, the House of Commons public accounts committee reported<\/a> that the government\u2019s \u00a35.2 billion flood defence programme is 40% behind schedule and expected to protect just 200,000 properties by 2027 \u2014 far short of its original 336,000 target. <\/p>\n Read more: By 2025, Flood Re has been under mounting strain. Reinsurance costs had have risen by \u00a3100 million in just three years, and policy uptakes have jumped by 20% in a single year \u2013 both signs that private insurers were retreating from high-risk markets. <\/p>\n In July 2025, Flood Re\u2019s CEO, Perry Thomas, warned that the UK\u2019s overall flood resilience have worsened since the scheme\u2019s launch, as mortgage lenders, housebuilders, and successive governments have \u201cfailed to pull their weight\u201d<\/a>.<\/p>\n Storm damage is more likely as climate change risk increases. When insurance becomes unaffordable or unavailable, households are left exposed and property values decline, making mortgages harder to obtain. This erosion of coverage threatens the wider financial system: banks rely on insured property as collateral, but without cover, that collateral rapidly loses value. <\/p>\n If the government fails to meet its climate adaptation targets<\/a>, as many as 3 million UK homes could become effectively worthless within 30 years.<\/p>\n For the banking sector, this creates the risk of homes becoming stranded assets \u2014 uninsurable, unmortgageable and falling in value \u2014 leading to rising defaults and mounting losses. Unless lenders adopt climate-adjusted risk models that integrate physical hazards such as flooding, storms and heatwaves, they risk underestimating the true exposure of their mortgage portfolios.<\/p>\n If these climate-risk-exposed mortgages are mispriced and then bundled into mortgage-backed securities and sold to investors, the resulting shock could cascade through credit markets \u2013 like the 2008 subprime mortgage crisis, when large volumes of high-risk home loans to borrowers with poor or limited credit histories were repackaged and sold as safe investments. The difference is that this time the crash would be driven by physical climate damage rather than purely financial mismanagement.<\/p>\n A one-way street<\/p>\n Traditional financial crises follow cycles of growth, downturn and recovery, but climate risk moves in only one direction. Rising global temperatures are driving more frequent and severe floods and storms. Without timely adaptation, the damage compounds, eroding property values, undermining insurance and threatening financial stability.<\/p>\n Historical insurance models treated extreme weather as rare \u201ctail risks,\u201d but these events are now more frequent, severe, and interconnected. The tail is becoming \u201cfat,\u201d and shocks ripple across sectors and regions. In short, risk is evolving and insurance frameworks must evolve with it.<\/p>\n Flooding is no longer just an environmental issue. It is a systemic financial threat. Insurers, regulators and lenders must adopt forward-looking models that translate physical climate risks into financial metrics. These models influence market behaviour by shaping how capital is allocated, assets are valued, and risks are priced. <\/p>\n This, in turn, guides investment, planning and adaptation \u2014 the process of adjusting systems, infrastructure and practices to withstand and recover from climate impacts. <\/p>\n Effective adaptation measures, such as upgraded flood defences, reduce the future risk of climate-related damage. It\u2019s a feedback loop: better modelling enables smarter adaptation, which in turn strengthens financial stability.<\/p>\n Don\u2019t have time to read about climate change as much as you\u2019d like?![\"\"](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2025\/11\/file-20251020-56-2a39nq.png\")
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\n Your essential guide to climate finance<\/a><\/p>\n![\"tree](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2025\/11\/file-20250919-56-3dskja.jpg\")
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\n pcruciatti\/Shutterstock<\/a><\/p>\n![\"Imagine](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2025\/11\/1762055543_862_file-20250110-17-yge7uv.png\")
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Get a weekly roundup in your inbox instead.<\/a> Every Wednesday, The Conversation\u2019s environment editor writes Imagine, a short email that goes a little deeper into just one climate issue. Join the 45,000+ readers who\u2019ve subscribed so far.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Imagine waking up to find your living room underwater for the second time in five years. You try…\n","protected":false},"author":2,"featured_media":266212,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[192,79],"class_list":{"0":"post-266211","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-environment","8":"tag-environment","9":"tag-science"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/266211","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=266211"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/266211\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/266212"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=266211"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=266211"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=266211"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}