Written by
Reviewed by William Cooper
Most people now accept that climate change is affecting the planet, but what many don’t realise is that climate change and the cost of insurance cover are directly linked. Climate change is having a significant impact on the cost of insuring our homes. More frequent flooding and unpredictable changing weather patterns are posing significant challenges to insurers by increasing the volume and cost of claims.
As a result homeowners are facing increased premiums, stricter policy conditions, and in some cases fewer providers offering cover. Meanwhile, higher rebuilding costs and more properties falling into ‘high risk’ zones are fuelling big changes in the industry. So, just how is climate change impacting home insurance and what can homeowners do to mitigate the impact?
How is climate change affecting home insurance?
Increasing premiums
Over the past few years, home insurance premiums in the UK have steadily increased, with claims caused by climate change cited as a contributing factor. And with insurers paying out more to settle the claims, premiums are increasing across the board. As a result, depending on the region and policy type, homeowners in the UK are now paying more for home insurance cover compared to a year ago. In fact, The Association of British Insurers (ABI) reported a 16% increase in combined buildings and contents insurance costs between 2023 and 2024 in their latest home insurance report.
As more areas are classified as high-risk due to flooding, storm damage or coastal erosion, insurers are responding by adjusting their prices to reflect this growing risk. The price of building materials has also increased, which has affected the cost of repairing damaged properties. All of this means more homeowners, especially those in high-risk areas, may have to pay more to insure their homes.
Shifting risk zones
As climate changes cause increasing problems, those regions considered at greater risk of flooding are also increasing. Insurers now use advanced tools like geospatial mapping to accurately pinpoint those areas at greater risk. While this allows for more tailored policies, it also means more restrictions and higher premiums in some areas. In fact, some properties previously considered safe may now be reclassified as high-risk and struggle to obtain insurance, reflecting just how significant the link between insurance and climate change has become.
It may be harder to find home insurance
Homeowners in high-risk flood areas may struggle to find insurance coverage as some insurers are opting to pull out of the areas altogether. With less competition, those homeowners are faced with limited options.
Higher rebuilding costs
The cost of rebuilding after environmental damage is also more expensive than ever. The cost of building materials and skilled labour continues to rise with inflation, while climate change is affecting supply chains and the production of essential materials like timber. Warmer winters, heatwaves, wildfires, and the spread of pests, all driven by climate change, have led to a global shortage of materials and a hike in prices. Listed buildings are also more susceptible to the effects of climate change. Not only are they older and more vulnerable to weather damage, but they also require specialist or reclaimed materials, which are typically expensive and can be difficult to source.
Government intervention in home insurance
Flood Re is a national scheme designed to make flood insurance more affordable and accessible for homes in areas that have historically faced the highest risk of flooding, as well as properties in locations where flood risk has recently increased.
The scheme will run until 2039, giving the insurance market time to develop long-term solutions while continuing to support homeowners in flood-prone regions.
Under Flood Re, when a homeowner makes a valid flood-related claim, their insurer pays out as usual and is later reimbursed by Flood Re.
What can homeowners do to tackle this?
Reduce the environmental risk
While you may not be able to control climate change, you can reduce the risk of it damaging your property and avoid rising insurance premiums by taking a few proactive steps, such as:
- Installing flood barriers
- Fitting storm shutters
- Insulating water pipes
- Regularly clearing out gutters and downpipes
- Inspecting and repairing any damage to roofs, windows and doors
- Trimming back trees or overhanging branches
Over time, these measures can help reduce the impact of climate change on home insurance costs by making your property more resilient. For more tips on protecting your home from the impact of climate change, take a look at our guides on winter home maintenance and how to prevent water damage.
Understand insurance policies
As a homeowner, knowing how home insurance interacts with climate change is essential for safeguarding your property and finances. Extreme weather events like flooding, storms, and wildfires are becoming more frequent, and some insurers are reducing coverage in high-risk areas. Researching local providers can help you identify which insurers are still offering cover, particularly if you live in an area prone to flooding or other climate-related risks.
It’s also important that you understand the specific terms, exclusions and excesses that may apply if you need to make a claim. Always take the time to read your policy in full, including the fine print, to ensure you know exactly what your home is covered for, such as subsidence, storm or flood damage, as well as any conditions or limitations that could affect a future claim.
The outlook on home insurance and climate change
An increase in defensive measures
Extreme weather events have always been part of our climate, but recent trends show they are becoming more frequent and severe. Looking ahead, home insurance providers are likely to pay closer attention to the preventative steps homeowners take to protect their properties from weather-related damage. Homes equipped with flood defences and other safeguards may be viewed more favourably by insurers, potentially qualifying for lower premiums – especially in areas prone to flooding or where risk has increased.
Looking ahead, home insurance providers are likely to pay closer attention to the preventative steps homeowners take to protect their homes from weather-related damage. As more significant and extreme weather-related events due to climate change continue to intensify, properties fitted with flood defences and other safeguards may be viewed more favourably by insurers. This could make them eligible for lower premiums, especially if they reside in flood-prone areas.
Will the insurance industry cope?
In 2023 alone, UK insurers paid out £573 million in weather-related home insurance claims. The growing number of claims is putting an immense strain on insurers and with extreme weather expected to become more prevalent in the future, insurers may need to reconsider how they assess risk, set premiums, and structure the cover they offer for long-term sustainability.
Protect your high-value home with Stanhope
Climate change is undoubtedly making home insurance more complex and expensive. With rising premiums, stricter criteria and higher rebuild costs, the key is to be prepared. Stanhope specialises in high-value home insurance and understands how climate risks are reshaping the UK market. Get in touch with us today for a quote and expert support in protecting your most valuable asset.
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Very helpful, in a slightly confusing situation they made everything very clear and got me what I needed. Thank you.
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Written by Matthew Ashton
I started working in the insurance industry in 2004. Four years later, I left to focus on theological studies, working as a youth worker and then as a ministry director in Seattle, USA. When returning to the UK, I had an opportunity to work for the late Andrew Marchington. I joined his firm as a sales advisor when it had around ten staff members. Within three years, I was Head of Ops with a staff team of over 30 people. After a chance encounter in 2019 with Rachel Living and Will Cooper, I co-started Stanhope to build a high-value home, luxury watch, and jewellery broker synonymous with trust. I love being with Donna, my wife, and four kids when not working, cramming in the odd row, or run when I can. I am fortunate to love what I do and consider it a blessing to grow the Stanhope brand.