Briefing: Climate risk places insurers on increasingly shaky ground

According to a blog published by the UK’s Met Office on 30 July 2025, Brits should be preparing to batten down the hatches against “unsettled spells and some stormy conditions”.

The national weather service reported: “The most intense and frequent showers are likely across southern England and parts of Wales, where there is a significant risk of heavy, thundery downpours.

“Rainfall totals could reach 25mm to 35mm in just an hour, with up to 60mm possible over a few hours. These conditions may lead to localised flash flooding, accompanied by frequent lightning and hail.”

These predictions were followed by the onset of Storm Floris this week (4 August 2025), which has primarily hit the north of England and Scotland – the Met Office estimated that wind speed could even reach 85mph in a report published on 1 August 2025.

This unseasonably wet weather in the peak of British summertime both contributes to and masks a real weather related threat hitting UK insurers – subsidence.

Subsidence refers to the downward movement or sinking of the ground. When subsidence occurs beneath a property, this can cause its foundations to become unstable, leading to structural damage and potentially costly repairs.

This natural phenomenon can be linked to fluctuating weather conditions, where different soil types – such as clay – expand in wet weather and contract in dry weather.

At the end of July 2025, insurer Ecclesiastical issued a warning about subsidence risk after recording the driest start to the year in England since 1976 – a stark contrast to spring 2024, which was the wettest in 38 years.

Government body the Environment Agency predicted that widespread drought conditions could be rife until September, meanwhile, with reservoir levels in England and Scotland below their usual levels for this time of year.

The last drought in the UK occurred in the summer of 2022. As a result of those drought conditions, Ecclesiastical saw a 54% increase in subsidence claims between 2021 and 2022 – its highest reported level of these claims since 2018.

In November 2024, the ABI reported that subsidence payouts for home insurance claims in the third quarter of that year hit £66m, an increase of 11% on the £59m paid in the second quarter of 2024 and a 61% uptick compared to the same period in 2023.

A similar trend was noted in a May 2025 article published by price comparison website Go.Compare.

Looking at the claims data submitted during the home insurance quote journey on its website between 1 January 2016 and 31 December 2024, Go.Compare found that flood and subsidence related claims rose by 58% across the UK. Over the same reporting period, general home insurance claims only increased by 20%.

A more nuanced risk

Alongside weather events, a further substantial subsidence risk is the impact of nearby trees via their root systems, extracting moisture from soil. If a tree is identified as the culprit of subsidence, it is highly likely to be of a significant size.

If a decision is made by insurers to fell the tree, this could quickly grab the attention of environmental protestors – this brings with it a whole new set of risks for the industry.

In recent years, I have seen insurers and environmentalists clash over the fate of several large trees – protestors have demanded alternative remedies to be found rather than the removal of the tree, even if causation is unequivocal.

Protestors may well take the decision to occupy the site of the tree in an effort to block its removal. If so, a High Court injunction will be needed before these individuals can be physically removed – no doubt in full view of the media.

Suddenly, a traditional and increasingly common household claim can become a reputational risk – especially considering the backdrop of the insurance industry’s ongoing efforts to drive its environmental, social and governance (ESG) agenda.

The world’s changing climate brings with it new risks and new opportunities for insurers, but it is also changing the scale and shape of the risks on which the industry is built.