Articles - Insurance in an Era of Escalating Climate Risk

 

Consider the events of 2025 - Storm Éowyn was the UK and Ireland’s most powerful windstorm for over a decade[i], bringing red warnings, severe impacts and, tragically, fatalities. According to the Met Office[ii] the storm was the most significant windstorm for Northern Ireland since the Boxing Day Storm of 1998[iii]. It left thousands without power, caused approximately €300 million[iv] in damage, and triggered over 33,000 claims in Ireland[v]. Perhaps not surprisingly, the Association of British Insurers has reported that during the first half of this year, claims for weather-related damage to people’s homes and possessions hit £424 million.[vi]

 

2025 has also been the warmest summer on record[vii]. Across the UK, mean temperatures reached levels never-before recorded, with large swathes of the country experiencing conditions more than 2°C above the seasonal average[viii]. One of the main drivers behind the record warmth was climate change - rising greenhouse gas concentrations have increased the baseline temperature, making record-breaking summers more likely[ix].

 

While dry weather brings its own risks such as subsidence and wildfires, climate change is also expected to increase the frequency and severity of flood events. Single-day rainfall events are set to put huge strain on flood defences and sudden downpours may cause flash flooding in urban areas, damaging homes, businesses and vehicles. Projections show that over 600,000 additional properties could be categorised as high risk from flood by 2100[x]. 

 

Therefore, to complement perils data that confirms the flood risk of a property or vehicle today for pricing and underwriting, scenario-based climate change datasets can now offer insurance providers a range of “what if” climate change scenarios for flood risk going as far as 75 years ahead.

This forward-looking data can help insurance providers to stress-test portfolios against rising frequency and severity of floods and model loss potential under different warming trajectories—vital for Solvency II, capital adequacy, and strategic planning.  It can also support underwriting decisions for home, motor and commercial property.

 

The different scenarios for climate warming are based on the main four RCPs (Representative Concentration Pathways): RCP2.6 (Low Emissions / Best Case); RCP4.5 (Stabilisation Scenario); RCP6.0 (Intermediate Scenario); 8.5 (High Emissions / Worst Case ). These climate change scenarios were developed by the Intergovernmental Panel on Climate Change (IPCC)[xi] to show how the climate might change depending on how much emissions are cut or continue. The conditions of each scenario are used in the process of modelling possible future climate evolution.

 

By integrating climate change data into workflows, property and motor insurance providers can understand the range of scenarios for the flood risk for a single address, a vehicle or a whole book of business over a choice of time periods up to 2100.

 

With a greater level of understanding of how flood risk could impact their business in the future, insurance providers can make more informed decisions when it comes to business strategy, product innovations, pricing and risk acceptance. Insurance providers could also use the insight to get customer engagement, making them aware of the ways they can mitigate potential risks and protect the things they hold dear.

 

This comes as a time when there is still a worrying lack of awareness of flood risk amongst consumers. Research from the ABI has revealed that 25% of UK adults don’t know if their current home is at risk of flooding and storm damage - and only 27% of those would know how to find out[xii].   

 

Today’s severe storms and heatwaves are only the beginning of the changes we are set to see in our climate. The forecasts are unambiguous—global temperatures are climbing and will remain historically high for years to come, raising the likelihood and severity of extreme events[xiii].

 

For insurance providers the choice is clear, leveraging current perils geospatial intelligence data is essential to support risk assessment right now while scenario-based, multi-decadal data can aid in anticipating future risk and sustaining solvency. Together, these data layers can offer the clarity the market needs — and the foresight.