The last ten years have been confirmed as the hottest decade on record for the planet. Undeniably, this is caused by climate change. As well as resulting in catastrophic storm damage and fires destroying homes, ten of the most extreme weather events of 2021 alone cost the world US$170billion1, and 2021's extreme weather has led to the largest pay-out for insurers in the last ten years2.

Rising temperatures

Not only this, if climate change continues un-checked we are going to find a reversal of household and commercial heating demand due to the rising temperatures across the year. Demand for heating is likely to decrease across the winter and cooling demand will increase in hotter summers with air conditioning uptake increasing.


Flooding is already a major risk for many cross the UK and is only projected to increase with climate change. Flooded homes can cause long-term and severe impacts on mental health and wellbeing, alongside the obvious damage to property. This risk is already classed as high magnitude with 1.9 million people across all areas of the UK exposed to frequent flooding from either river, coastal or surface water flooding3. Again, this is projected to increase even further in the absence of higher levels of adaptation.


A further threat, already well known to insurers, is the issue of subsidence. Drier summers are increasingly becoming the norm meaning that houses in vulnerable areas will be more prone to damage due to the shrinking and cracking of the soil.

Commercial properties

In terms of commercial properties, there are also risks in the move towards a cleaner, greener economy as businesses face major changes in asset values and business costs. For property investors this can translate to the green credentials of the buildings they own, with demand likely to be focused on the most sustainable assets, with the risk of buildings that don't meet the desired criteria or government regulations becoming stranded assets.

Impact of extreme weather on insurers

The winter floods and storms in the UK in 2020 cost the insurance industry over £800 million and with climate change that is only likely to increase4. This is a theme that can be found across subsidence claims as well, with claims increasing 49% between July 2020 and July 20215.

Mitigating the effects of climate change

To combat the effects of climate change, homeowners and business owners alike are beginning to invest and upgrade to greener properties. These properties are made to have a smaller carbon footprint than traditional buildings and constructions.

Green technologies & products and associated risks

However, research carried out by insurance provider Neos states that 28% of homeowners say they have or know someone who has experienced an accident in their home caused by modern green appliances6. These positive changes therefore have consequences.

Potential risks of these new technologies


Solar panels are one of the most common and popular green products with housing. Although not a large fire risk, due to the nature of the energy generated (DC as opposed to AC) the risk is increased as the system cannot be turned off. Fires are often catastrophic due to the nature of the installation; this can hinder investigations into the cause and recovery prospects.

A living roof fosters the growth of vegetation, made up of a waterproofing layer, a root barrier, a drainage system and a growing medium for plants. Whilst they can increase the lifespan of a roof, they are an increase in weight load which can cause its own risk. They must be installed to the correct specification to avoid risk / damage and require additional maintenance. Without this, they can attract insects and vermin which may present insurance risks.

It should include fire breaks at the perimeter of the living matter, including around roof light openings, windows and doors. The integrity of these breaks must be preserved, breaches can occur where organic matter encroaches upon the fire break, or where the edges are not maintained.

Blue roofs provide a sustainable drainage method, designed to manage storm water over a 24-hour period. There are issues due to weight and increased chance of leakage that may cause substantial damage to the property due to the volumes of water. If the waterproof membrane is damaged and begins to leak, the damage caused could be catastrophic.

Straw bales and hempcrete are a renewable source of building materials. There is risk of biological degradation, infestation, presence of moisture, structural degradation and fire.

A tankless water heater is an energy efficient way of using hot water, due to not needing to heat gallons of water. Regular maintenance is needed to keep in good working order. Whilst generally safe, if incorrectly installed there can be serious concerns in relation to carbon monoxide leaks.

Energy storage systems are an alternative to solar panels. Just like any battery, there can be issues with combustion that can cause wide-spread fires. This can lead to significant practical difficulties in identifying whether lithium battery damage has been caused by human error, electronic error or runaway overheating. Insurers may find themselves with limited root cause information available where there is minimal battery material remaining post-fire.

E-scooters are a green way of commuting in the inner-city, popularised by European countries such as Belgium, Spain and Norway. E-Scooter batteries pose a serious fire risk due to the use of lithium-ion batteries.

Electric vehicles are becoming more popular due to government incentives, as is the demand for car charging ports in the home. This is an increased variable to consider due to electrical fire risk

A rainwater harvesting system is an efficient way of collecting, filtering, storing and using rainwater for irrigation and various other purposes. They require regular maintenance as they may be prone to rodents and insects. They can become blocked due to leaves or other debris stuck in the tank and system. This can easily lead to a water damage claim because of the blockage.

Policy inception considerations & long-term risk

As we are becoming more aware of our impact on the climate and environment, property owners will be looking to implement these new technologies and products. Insurers and the wider industry need to be aware of potential issues at policy inception and the impact these products may have in the long term on potential risk.

However, it is not all doom and gloom. Luckily, not only are homes and commercial properties becoming greener, but they are also becoming smarter due to the advent of technology. We are now in a position where our smoke detectors and burglar alarms can be connected to our smart phones. Leak bots are becoming more mainstream, allowing property owners the benefit of being notified much earlier of potential escapes of water. Escape of water claims account for around a quarter of all claims made in the UK7 and being able to combat this with modern technology will be an asset for insurance companies going forward. All this technology gives us the opportunity to be aware of issues before they become catastrophic for our homes and businesses.

Insurers need to be aware of any eco additions to properties on existing policies, and vice versa in that policyholders need to be aware that they may need to disclose additions to their properties to their insurers for coverage to be accepted in the result of a claim. Insurers may be required to add 'green upgrades coverage' to their policies to ensure that the increased cost of repairing or replacing 'green' property is covered.

As the world acknowledges and begins to tackle climate change, the insurance industry must also adapt to reflect the new and ever-changing risks posed.






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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.