Sustained heat, floods and heavy rainfall could drive subsidence-related insurance costs to over £1.9bn by 2030, according to analysts at PwC.
PwC’s analysts suggest that subsidence-related insurance will be significantly impacted if the levels of sustained heat continue.
According to the firm, this highlights the effect record temperatures can have on insurance claims.
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.”
Meanwhile, the extreme winter weather from 2019 to 2020 saw economic losses of £333 million due to flooding, and this figure could soar to £500m in 2050 assuming that flood-management approaches and expenditure remain unchanged, says PwC.
Khan continued, “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 homeowners in the worst affected areas.
“It’s clear that the ongoing impact of 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.
“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.”
