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
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 Freeman’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.
Frequently asked questions
What is the home insurance crisis and how does it affect the UK?
The home insurance crisis refers to the growing inability of households in climate-exposed areas to obtain affordable or any home insurance coverage as insurers reprice or withdraw from high-risk markets. In the UK, one in nine new homes built between 2022 and 2024 were constructed in areas of medium or high flood risk. As climate change increases the frequency and severity of flooding, wildfire, and extreme weather, insurers face losses they cannot sustainably absorb at current premium levels. The UK is on a trajectory already visible in Australia, New Zealand, and California, where insurance affordability stress and market withdrawal are already structurally embedded.
What can the UK learn from Australia’s home insurance crisis?
Australia demonstrates what happens when climate risk outpaces insurance market capacity over an extended period. Approximately one in seven Australian households now experience insurance affordability stress, defined as premiums exceeding four weeks of gross household income — with the average for affected households reaching 9.6 weeks of income. Annual premiums of AUD $30,000 in high-risk areas are no longer outliers. The consequences include underinsurance, policy cancellation, and households breaching mortgage lender requirements by going without coverage. Research from 2023 suggests around three per cent of households lacked building insurance entirely, with a further five per cent underinsured — representing approximately AUD $100 billion in mortgages on inadequately insured properties.
What happened in California and what does it mean for insurance regulation?
California’s experience is a warning about the unintended consequences of price regulation in insurance markets. Proposition 103 required state approval before insurers could adjust their rates, preventing accurate risk pricing. Unable to price flood and wildfire risk at commercially sustainable levels, several major insurers exited the California market in the years before the January 2025 Los Angeles wildfires. When rate adjustments were eventually permitted, premiums reflecting actual risk became unaffordable for many policyholders. The result was a market that was neither functioning nor fair — a cautionary example of how well-intentioned regulatory intervention can accelerate the very crisis it was designed to prevent.
What is the Inland Flooding Bill and why does it matter?
The Inland Flooding Bill is proposed legislation introduced by George Freeman MP designed to improve accountability for flood risk in the UK, help residents better understand and prepare for their exposure, and tighten planning rules to prevent further development in high-risk areas. The Bill is informed by evidence from insurance market data, international case studies, and stakeholder input including from the insurance sector. It represents one of the live legislative opportunities to begin shaping a deliberate UK policy response to the coming home insurance challenges rather than waiting for a crisis to force action.
Who bears the financial burden when homes become uninsurable?
This is ultimately a political choice rather than an economic inevitability. The options include households bearing the cost through higher premiums or loss of coverage; government intervention through subsidy schemes, reinsurance pools, or managed retreat programmes; insurers absorbing losses that the market cannot rationally price; or lenders adjusting their requirements for properties in high-risk areas. Each option involves trade-offs and distributional consequences. The international evidence suggests that countries which delay this conversation tend to resolve it by default — through crisis — rather than through deliberate policy design. The UK’s current planning policy review and the Inland Flooding Bill are opportunities to begin making these choices explicitly.
What does uninsurability mean for real estate values and mortgage lending?
When homes become uninsurable or insurance becomes unaffordable, the consequences extend beyond individual households to the broader property market and financial system. Mortgage lenders typically require buildings insurance as a condition of lending — properties that cannot be insured may breach lender requirements, triggering foreclosure risk. Asset values in affected areas are likely to reprice as the market begins to reflect climate exposure more accurately. Residential property represents approximately three quarters of global real estate value, which itself is roughly four times global GDP. Insurance withdrawal is therefore not just a household affordability problem — it is a systemic economic risk with implications for real estate portfolios, pension funds, and financial stability.
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.