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Claims arising from climate change are increasing and they create significant challenges for insurers. One such challenge is the rise in subsidence claims.
It is well known that subsidence occurs when the ground beneath a property sinks due to ground instability, which can lead to unbalanced foundations and walls cracking. The structural integrity of the building may even be compromised. This damage can result in substantial repair costs. The main causes of subsidence in the United Kingdom are clay shrinkage and soil erosion, which are much more likely to occur following periods of hot weather. Historically, periods of high temperatures in the UK have led to ‘surging’ patterns of subsidence, with higher incidences in 2003, 2006, 2013, 2018, and 2022.
In 2021, LV= General Insurance reported that larger subsidence claims were costing around £30,000, with some in excess of £500,000.
The UK summer of 2022 was the hottest on record for over 40 years, leading to the most recent surge in subsidence claims. With climate change leading to increased periods of dry weather, subsidence claims are more frequent, more severe and are an increased risk for insurers.
Often there are delays before property owners discover cracking and damage caused by subsidence, so in the short term, insurers may not see an immediate rush of claims arising from these amplified conditions. However, these issues cannot be ignored. As the weather gets increasingly warmer and drier, it is possible that subsidence ‘surges’ will become less common. Instead, they may be replaced by consistent subsidence in the summer months. Without intervention, this problem will worsen. It has been estimated that by 2050, 1.9 million households are likely to be at risk of subsidence issues.
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With the rising costs of building materials and increasing inflation, subsidence claims are also likely to surge in cost as well as volume. Looking to the future, homeowners, developers and insurers will need to take adequate steps to invest in long term solutions, and take preventive measures to tackle subsidence and other risks posed by climate change. Construction professionals will also need to consider how structures can be designed to better withstand climate changes.
Kennedys will continue to monitor developments in this area, and assist clients in navigating increases in claims.
Related item: Rewriting the risk: Addressing the challenge of climate change
Construction and engineering
Insurance and reinsurance
United Kingdom