Extreme temperatures could push up subsidence payouts to £1.9bn by 2030

Subsidence-related insurance will be impacted significantly if extreme temperatures persist around the globe, with insurance costs potentially swelling to over £1.9bn by 2030, according to fresh analysis carried out by PwC.

Sustained heat, floods and heavy rainfall could also see insurers hit with further increased costs. Extreme winter weather seen in 2019 to 2020 saw economic losses of £333m due to flooding, and this figure could soar to £500m in 2050 assuming that flood-management approaches and expenditure remain unchanged, the firm said.

Mohammad Khan, general insurance leader at PwC UK, commented: "Our model attempted to put a numerical figure on the impact extreme weather will have on insurance claims. With repeated very hot summers, we are seeing a rise in subsidence cases. Given the already dry soil and further hosepipe bans, we could see a significant spike in subsidence, which causes the ground beneath a building to sink and potentially pulling the foundations down with it.

"We are also seeing other property damage claims related to fires starting in nearby open areas that then spread to homeowners’ gardens and result in fence, garage and decking fires.
"Extreme weather events like this can result in some insurers taking drastic action, such as exploring the risk/cost benefit of giving cover in certain circumstances. This can result in cover for some risks becoming unaffordable or simply unavailable for home-owners in the worst affected areas.

PwC modelled the insurance impact on increased weather related losses under the high end of the range of future pathways (Shared SocioeconomicPathways 5-8.5).

"It's clear that ongoing impact on climate change will significantly shape how the sector will choose to manage and absorb risks and our new modelling proves that potential costs could be the deciding factor as to whether a household receives vital cover or not," Kahn added. “Scenario modelling is an important step towards understanding climate change losses and managing its impacts on the future cost and availability of insurance and should be seen as more than a reporting exercise.”

    Share Story:

YOU MIGHT ALSO LIKE


COMMUNICATING IN A CRISIS
Deborah Ritchie speaks to Chief Inspector Tracy Mortimer of the Specialist Operations Planning Unit in Greater Manchester Police's Civil Contingencies and Resilience Unit; Inspector Darren Spurgeon, AtHoc lead at Greater Manchester Police; and Chris Ullah, Solutions Expert at BlackBerry AtHoc, and himself a former Police Superintendent. For more information click here

Modelling and measuring transition and physical risks
CIR's editor, Deborah Ritchie speaks with Giorgio Baldasarri, global head of the Analytical Innovation & Development Group at S&P Global Market Intelligence; and James McMahon, CEO of The Climate Service, a S&P Global company. April 2023