Ten years ago, Mark Carney, the then Governor of the Bank of England, warned us about the Tragedy of the Horizon. He made clear that changes in the climate brings ‘profound implications’ for insurers, our financial institutions, and the wider economy.
But when it comes to insurance, many at the household level are living in the ‘Tragedy of the Now’.
While Carney spoke about future physical risks, liability exposures, and transition uncertainties, across financial markets, at the household level, many are now facing a brutal reality:
– Insurance premiums consuming unprecedented shares of household income, that’s if available
– Markets where insurance carriers have walked away
– Properties becoming uninsurable – and therefore unmortgageable and
– The invisible erosion of real estate values as climate risk pricing accelerates
The domino effect isn’t theoretical anymore:
No insurance -> No mortgage approval
Lost coverage -> Collapsing property values
Widespread defaults -> Systemic financial market risk
This isn’t just a residential problem. Commercial real estate and infrastructure are also being hit. The repricing Carney warned about, what he called the potential ‘climate Minsky moment’, is happening in slow motion across property markets worldwide.
In my research, I’m examining how three forces are colliding:
– Climate reality accelerating faster than models predicted
– Re/insurance markets responding rationally but with devastating consequences and
– Real estate valuations built on assumptions that no longer hold
Carney called for better disclosure, stress testing, and a ‘time machine to shine light on risks lurking in the darkness for years to come.’ But judging from recent calls from the various financial regulators, we’ve pretty much failed to adequately do that work across the wider system.
The question for anyone managing real estate assets, underwriting risk, or advising property investors isn’t whether this will impact your portfolio, but whether you’re prepared for what’s here and what’s coming down the line.
If you’re navigating these intersecting challenges – if you’re seeing insurance availability shift in your markets, if you’re grappling with how to value climate risk, if you’re trying to future-proof investments in an era of accelerating change – I’d welcome a conversation.
The market is repricing decades of assumptions in real time. The professionals who understand this transition will define the next generation of real estate and re/insurance strategy.
What are you seeing in your market? Are insurance dynamics changing how you’re making your investments?
I’m exploring the collision between climate change, insurance markets, and real estate. Connect with me to discuss how these forces are reshaping the industry.
You can download a full copy of the speech from the Bank of England website here -> Breaking the tragedy of the horizon – climate change and financial stability – speech by Mark Carney