Articles - Exploring the cold truths of our warming planet

Breaking records is traditionally seen as a cause for celebration, but not where the U.K. climate is concerned. Not only was 2022 the first year in the U.K. when 40°C was recorded, it was also the warmest year in records back to 1884 . Last year’s heatwave resulted in the equivalent of one new subsidence claim made every 15 minutes in second half of the year. As the 28th meeting of the Conference of the Parties (COP 28) approaches, the insurance industry has an opportunity to collaborate with government, planners and investors.

 By Heikki Vesanto, manager GIS data science, UK and Ireland, LexisNexis Risk Solutions 

 In order to share knowledge and experience to create a holistic approach to minimise the devastating impact of our changing climate. After this summer’s no show, it is tempting to reflect on the summer of 2022 through rose-tinted spectacles, however, increasing temperatures play havoc on coastal communities.

 Warm water and ice sheets melting, mean that sea levels around the U.K. have risen 11.4 cm in the past thirty years, each centimetre increases the risk of a major storm overtopping flood defences. Indeed, it was only because of intact defences that this was avoided around the Bristol Channel and Severn Estuary during Storm Eunice last year.

 With heavier rains and more rains predicted to fall during winter storms , it is likely that flood defences like these are going to become increasingly stretched across the U.K. Insurance providers will need greater levels of data on the presence and integrity of permanent flood defences. This would be in addition to the 40 thousand metres of temporary flood barriers which the Environment Agency holds ready to deploy. After all, if flood defences are in need of replacement the impact on risk, pricing and underwriting is hugely significant.

 Meanwhile the pressure remains on the Government to build new homes. This is another example of where a more unified approach to future risk is needed. Over five thousand homes were approved for development in areas at the highest risk of flooding in 2021 and with more days of heavy summer rainfall on impermeable ground anticipated, flash-flooding will also impact more people’s lives. It is crucial that property developers, insurance providers, government and local authorities work together to tackle this important issue.

 Indeed, the issue of flash-flooding raises the importance for underwriters to be aware of the land or locations they are insuring. There may be different outcomes in terms of flood exposure depending on the soil substance and local drainage solutions. Flash flooding is also becoming a regular occurrence in towns and cities where clay soils and ageing drainage and sewage systems compound the problem. High net worth properties, with ‘mega-basements’ continue to be approved by planning departments though, where owners store expensive IT equipment and servers – a costly claim waiting to happen. With basements being the prime target of water ingress in a flash-flooding event, perhaps more could be done to educate designers, planners and property owners of the risks.

 While agreeing upon more considered planning outcomes is a longer-term objective, insurance providers can use data driven decisions incorporating topographical knowledge to provide fair insurance quotes for their policyholders. Geospatial data intelligence on perils, including LexisNexis® Basements Indicator, which helps property insurance providers identify whether a basement or an underground level may be present in a home or a commercial building, can play a huge role in understanding risk. In addition, deeper insights around home insurance claims for flood and subsidence will add a new dimension to risk assessment. LexisNexis® Precision Claims, a market-wide contributory claims database that helps insurance providers predict claims losses based on an individual’s home and motor claims history and the claims related to a property is set to launch in early 2024.

 The use of data in this way is critical in risk assessment and underwriting, but what else can be done to help mitigate the risk of the overwhelming damage that can be caused by extreme weather?

 Perhaps more could be done to convey the impact it is having on policyholders. Education could play a big part in lessening the impact of surge events and helping to encourage a more risk aware population. The industry makes no secret of the added cost to a motor premium due to fraud, so why not tell property owners how much climate change is adding to the cost of their home or business premises? Informing policyholders about risk management strategies they can adopt to help themselves can also go a long way to mitigate damage.

 One thing is for sure, understanding flood and subsidence risk is increasing in complexity. Knowing the insurance market has years of experience in predicting weather related risks and that this market has innovated and collaborated to help better understand these changing risks, it might make sense if policy makers considered ways that this expertise could be leveraged. We need to work collaboratively to help protect people and livelihoods from the increasing climate related risks we all face.

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