Property - market insights Q3/Q4 2024

This article was co-authored by Hawanatu Bangura, Litigation Assistant.

Government priorities

Mandatory housing targets for local authorities   

The new government’s pledge to build 1.5m new homes in the next five years was met with caution by the insurance industry. Whilst Defra have said they will “take steps to ensure we are building more high-quality, well-designed and sustainable homes”, the insurance industry considered it

Water-related risks, (including escape of water, flood and condensation) are the second highest cause of property damage. A collaboration between government and the insurance industry to mitigate water-related risks is welcome.   

Sustainability

The government is looking to build sustainable housing to meet their 2030 Net Zero ambitions. Ed Miliband, Secretary of State for Energy Security and Net Zero has said that the new government is determined to deliver a “rooftop revolution” in solar power and advocated that solar should play a role in the future homes standards. He is looking to set up a “solar taskforce” to produce and publish a solar roadmap.

Whilst this news is welcome, we continue to see consumers choosing cheaper solar installations over safety and quality, giving rise to claims due to maintenance issues and defective installation. Given Mr Miliband’s comments, we may see an increase in such claims. The solar panel and batteries industries in the US and Europe have called on their governments to impose tariffs on solar assets from China which they claim to be substandard.  Will we see the imposition of tariffs here to protect the UK solar market and mitigate solar risks?  

Climate change   

The London Climate Resilience Review published in July has found that London will continue to suffer extreme weather conditions with storms, floods, cold snaps and extreme heat becoming the new normal. Water-related risks will increase resulting in  insurers treating London properties with basements with more caution.   

In July 2024, Hurricane Beryl left the Caribbean and the US coast largely intact with insurers having the capacity to absorb the estimated US$2.7billion of property damage. However, Beryl is the earliest Category 5 storm ever recorded and scientists have explained that its 165mph sustained winds were fuelled by record warm waters. This is expected to trigger an extremely active hurricane season. Consequently, property commentators have predicted that the aggregation of all hurricane events this season could lead to significant losses for Property and Casualty insurers. 

Property fraud on the rise   

The cost of living crisis continues to be a driver of fraudulent claims from consumers who may resort to fraudulent means to relieve their financial burdens.  

To mitigate the fraud risk, insurers and their policyholders should 

• Keep on top of data (within GDPR restraints) to enable insurers to really know their policyholders and the risks they are underwriting
• Ensure claims adjusters consider the possibility of fraud with every claim

Ghost broking is also on the rise in the commercial property space and for both household and commercial property, we are seeing the increased use of AI such as deepfake technology when making fraudulent claims.  

We have also identified ghost broking as a key update in the Fraud and Professional liability section.

Claims inflation   

Swiss Re’s annual world insurance sigma report, published in July 2024, forecast an improved profitability in 2024 for property and casualty insurers, with industry-wide return increased by 4% so far this year. Global disinflation is predicted to continue with Europe nearing its target inflation levels and the US inflation rate returning to target in 2025.  Might we see a corresponding fall in claims inflation? 

Policing and Crime under the Riot Compensation Act 2016

The instances of civil unrest which occurred across England in August are likely to give rise to a significant number of property damage claims.

The Riot Compensation Act 2016 (RCA) repealed the Riot (Damages) Act 1886 and provides a system for payment of compensation where property has been damaged, destroyed or stolen in the course of a riot. The RCA simplifies the approach for defining a ‘riot’ for the purposes of determining whether riot compensation should be paid.

Under the RCA, an insurance company which meets a claim (in part or full) by a policyholder under a policy of insurance in respect of ‘riot’ damage can pursue the police authority in the area where the riot took place for reimbursement of payments made in respect of property damage.

Within 42 days from the date when the riot ended claims must be submitted to the claims authority for the Police force in the area where the riot took place.  The deadline for submitting a claim can change depending on certain factors, including the date on which the policyholder notified the insurer of a claim.