Will climate change make your home uninsurable? The government has no answer.

SUMMARY

Richard Murphy, political economist, examines the growing risk that climate change poses to the insurability of homes in the UK, highlighting the inadequacy of current government responses. He argues that without decisive intervention, rising climate risks could destabilize the housing market and trap homeowners in negative equity.

MAIN POINTS

• Climate change is increasing the frequency of floods, heat waves, droughts, wildfires, and rising sea levels, threatening the insurability of homes. [0:00]
• Rising insurance premiums and reduced coverage are already affecting flood-prone areas such as the Severn Valley and South Yorkshire. [1:01]
• The government’s Flood Re scheme is limited in scope and duration, leaving many exposed to new risks and threatening the stability of the mortgage and housing markets. [2:00]
• Negative equity and unsellable homes could result from uninsurable properties, with private insurers unable to absorb the systemic risks posed by climate change. [3:01]
• Government intervention is needed to provide insurance, invest in risk mitigation, enforce climate risk disclosure, and strengthen building standards. [4:02]
• Without a national strategy, climate change could trigger a financial crisis in the housing sector, and urgent government action is required to address these risks. [6:00]

DETAILED ANALYSIS

Climate change is rapidly transforming the landscape of risk for homeowners in the UK, with increasingly frequent extreme weather events such as floods, droughts, wildfires, and rising sea levels. These environmental threats are not only damaging properties but also undermining the foundations of the housing market by jeopardizing the availability of home insurance. Insurance is a critical requirement for securing mortgages, and without it, buyers cannot obtain loans, making homes difficult to sell and potentially trapping owners in properties that lose value.

This dynamic is already evident in flood-prone regions like the Severn Valley and South Yorkshire, where insurance premiums are rising and coverage is becoming scarce.

The government’s Flood Re scheme, designed to make flood insurance affordable, is both limited in scope and time-bound, offering no long-term solution for the growing number of households exposed to climate-related risks. As the frequency and severity of claims increase, private insurers are likely to withdraw from high-risk markets, leading to a situation where entire neighborhoods could become unsellable and families may face negative equity—owing more on their mortgages than their homes are worth. This scenario presents a macroeconomic risk that private markets are ill-equipped to manage, as their role is to price risk, not to absorb potentially unlimited losses.

Addressing this challenge requires the government to act as the insurer of last resort, ensuring that homeowners can obtain coverage and move if necessary. Beyond providing insurance, the government must invest in flood defenses, drainage improvements, and wildfire prevention, while mandating full disclosure of climate risks during property transactions and tightening building regulations to prevent new developments in vulnerable areas. Without a comprehensive national strategy, the UK risks a dual crisis: environmental disaster compounded by financial instability in the housing sector, with banks also exposed due to the high proportion of mortgages on their balance sheets.

Immediate and coordinated government action is essential to safeguard homeowners and the broader economy.

LINKS

• Poll about climate change and home insurance
• Transcript and further resources from Richard Murphy's blog
• ChatGPT prompt and instructions for writing to your MP about these issues
• Donation page to support Richard Murphy's work
• Richard Murphy on Bluesky social
• Richard Murphy's Funding the Future blog
• Channel introduction video

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