Key points
- The UK is on a trajectory toward a home insurance crisis already visible in Australia, New Zealand, and the United States
- 1 in 9 new homes in England (2022–2024) were built in medium or high flood-risk areas, per Aviva research
- The central question – who bears the financial burden of uninsurability — is a political choice, not an inevitability
- George Freeman’s Inland Flooding Bill and the Government’s NPPF review are live opportunities to act
This week I had the opportunity to present at a Parliamentary roundtable chaired by George Freeman MP at Portcullis House in Westminster. The roundtable is being used to inform George’s Inland Flooding Bill, a piece of proposed legislation designed to improve accountability for flood risk, help residents better prepare, and tighten planning rules. Alongside me presenting was Jason Storah, CEO of Aviva UK & Ireland. The conversation that followed was one of the most important I’ve been part of.
The timing couldn’t be more significant. Research from Aviva shows that one in nine (11%) new homes in England constructed between 2022 and 2024 have been built in areas of medium or high risk of flooding, with this figure projected to rise. It’s made national headlines. Following this was the response from the Association of British Insurers (ABI) to the National Planning Policy Framework consultation. The messaging was blunt – there are shared concerns from the insurance and finance sector around proposed changes to planning regulations, and the risk of flooding for new homes.
In our discussion, there was broad consensus on one particular issue: we need to be doing more. But to understand what “more” looks like, it helps to look beyond our own borders.
This isn’t just a UK problem
My remarks focused on what’s happening internationally, and the picture isn’t a comfortable one. In Australia, New Zealand, and the United States, the insurance market is hitting a crisis point that the UK is on a trajectory to follow. The difference is that those countries are further along, and there are hard lessons available if we’re willing to learn from them.
Australia: When premiums outpace income
In Australia, an annual home and contents insurance premium of AUD $30,000 – roughly £16,000 – no longer seems an outlier in high-risk areas. For households in the most exposed locations, that can represent 5, 6, or even 7 per cent of the total value of their home. Annually. And that’s assuming they can get insurance at all.
Approximately 1 in 7 Australian households are now experiencing what the Actuaries Institute of Australia call “insurance affordability stress” – where home insurance premiums exceed four weeks of gross household income. For those households, the average premium comes in at 9.6 weeks of gross income before tax. That is not a rounding error. That is a structural problem.
The consequences are predictable. When insurance becomes too expensive, households underinsure or drop coverage altogether. For those with mortgages, going without insurance means breaching lender requirements, and potentially facing foreclosure. This is why, in much of the reporting on this issue, affected homeowners are declining to go on the record. The fear of their lender finding out is, in my view, justifiable.
Research looking at 2023 figures indicates about 3 per cent of households did not have home building insurance, with an addition 5 per cent underinsured. This equates to AUD$100 billion in mortgages on inadequately insured properties, and likely the value is much higher.
While this figure might seem relatively small compared to the overall market value, it isn’t. Within this mix will also be households without mortgages, or where the bulk of the mortgage has already been paid off. Extreme weather events such as flooding or fire can be financially ruinous at the household level.
The value of property to the global economy cannot be overstated. All property is values at roughly four times global GDP. Residential property makes up just over three-quarters of this value. This is not just a household problem. It is a systemic economic risk.
New Zealand: The coming wave of uninsurability
Affordability is one dimension of the problem. Availability is another. Insurance retreat, where coverage becomes partially or fully unavailable on the private market, is already happening.
In New Zealand, estimates suggest that on current trajectories, around 10,000 coastal properties in Auckland, Wellington, Christchurch, and Dunedin alone could become uninsurable by 2050. And that may be a conservative figure.
New Zealand also has a housing crisis, much like the UK. Yet one major insurer made headlines with a blunt OpEd arguing that the answer is simple in one respect: Let’s stop building in dumb places. The political and practical reality of acting on that principle, of course, is anything but simple.
The deeper question being debated in New Zealand, of who pays, and where does the financial burden fall, is exactly the question we need to be asking in the UK and across Europe. Do households bear the cost? Does government step in? Do insurers absorb losses that the market can no longer rationally price? There are no easy answers, but the conversation is happening. We need ours to start in earnest too.
California: A warning about regulating pricing
It might be tempting to reach for straightforward solutions. Government intervention, market forces, or price regulation of insurers each have their advocates. But California offers a cautionary tale about what happens when policy doesn’t keep pace with physical reality.
By the time the Los Angeles wildfires hit in January last year, several major insurers had already exited the California market. The trigger was Proposition 103 – a measure requiring state approval before insurers could change their rates. Unable to price risk accurately, a number of insurers stopped writing new policies in the years prior to the fires. When adjustments were eventually permitted, premiums that reflected actual risk levels became unaffordable for many. The result was the worst of all outcomes: a market that was neither functioning nor fair.
Simple solutions, applied to complex problems, can come at a very significant cost.
Three takeaways for the UK
I closed my remarks with three points I’d like to leave here too.
The direction of travel is clear. Climate change is making homes harder, and in some cases impossible, to insure, and there is a price we will all have to pay. Avoiding that conversation now only makes it more expensive later.
We are not starting from scratch. Australia, New Zealand, and the United States are all further along this curve than the UK. There is genuine learning available — about what has worked, what has failed, and crucially, who has ended up bearing the cost.
The question of who pays is ultimately a political choice. It doesn’t have to be resolved by default or by crisis. George Freeman’s Inland Flooding Bill, and the Government’s current review of planning policy, are opportunities to begin shaping that answer deliberately. The roundtable at Portcullis House was a reminder that the expertise exists, the urgency is real, and the time for harder conversations is now.
Keyah Consulting’s provides climate and sustainability advisory services to real estate professional services firms – including strategic advisory, fractional CSO engagements, capacity building, and thought leadership.