Yves here. We’ve previously examined the troubling trend of entire regions in the U.S. becoming uninsurable, with areas in Florida and parts of California acting as early warning signs.
One often-overlooked factor contributing to this problem is the predominant use of wood as a building material in the U.S. In contrast, concrete structures are far more common in Asia and the Middle East. These materials are better suited to withstand severe storms, and they sustain significantly less damage during fires. By employing alternative materials and design strategies, the risk of extensive fire damage can be minimized. Consider, for instance, this example from the recent Malibu fires:
The New York Post elaborated on the topic:
“The survival of some homes while others nearby were consumed can be credited to a combination of thoughtful planning, robust structural integrity, environmental factors, and sheer luck,” notes fire safety specialist Daniel Vasilevski from Bright Force Electrical.
First and foremost, homes that withstood the flames were likely constructed with superior materials, such as stucco, metal, and stone, and featured roofs made from clay or metal. Double-glazed windows can prevent shattering due to heat and keep flames from entering the home. Additionally, sealing gaps in walls helps block smoke and fire, thereby minimizing damage.
“Material choices are not merely aesthetic or financial decisions,” Vasilevski emphasizes. “They significantly affect a structure’s resilience against extreme fire conditions.”
“The primary factors that determine whether a home will catch fire during a wildfire include the materials used for construction, the property’s upkeep, and the management of surrounding vegetation,” explains Wayne Whitney, a fire investigator with Fire Scene Analysis.
“The homes showcased in the articles featured noncombustible roofs and exterior walls, along with ample defensible space in their immediate vicinity.”
While it’s often simpler to construct new buildings than to retrofit existing ones, certain measures—like creating fire breaks, installing double-glazed windows, and sealing potential air vents—are manageable and relatively affordable. The pressing question remains: will these efforts instill enough confidence in insurers?
The situation in the UK appears even bleaker, particularly with regards to flooding. I’ve observed houses in flood-prone areas near the Thames elevated on metal stilts, allowing the ground level to serve as parking or limited storage. Enhanced new construction practices could offer solutions. Yet, it’s worth noting a critical point that Richard Murphy skims over: the likelihood of managed or de facto retreat from high-risk areas is significant (he only briefly mentions the necessity for adequate insurance to facilitate relocation). Over time, this could translate to significant losses in housing and commercial properties nearby.
As highlighted in our late 2025 coverage:
Our previous discussions on the escalating costs and unavailability of home insurance in certain U.S. regions, particularly in extensive areas of Florida and California, have been somewhat insular, focusing on local developments. The reality is that if home insurance becomes prohibitively expensive or unavailable, it will inevitably affect housing prices. As more regions begin to correct home values in response to insurance scarcity and escalating costs—assuming insurance can even be secured—buyers may face reduced mortgage affordability, leading to significant declines in home values and potential defaults.
The focus on Florida and flood risks inadequately addresses the threat of wildfires. Citizens in Europe and Canada can attest to the fact that regions once deemed safe have become perilous following prolonged dry and hot spells. It remains uncertain how sustainable the current mortgage finance model, which heavily relies on home insurance, will be in most U.S. markets moving forward.
This risk is not isolated to the U.S. Many nations where mortgage financing is common are likely vulnerable as well. For instance, a 2022 OECD report (evidenced by this Forbes screenshot) shows that the U.S. has one of the lowest rates of homes owned outright. It stands to reason that countries where less than 40% of homes are free from mortgages may face heightened risks from climate change—leading to increased insurance costs, mortgage acquisition challenges, and significant home price corrections. Are there readers in those countries noting similar concerns raised by local experts or officials?
By Richard Murphy, Emeritus Professor of Accounting Practice at Sheffield University Management School and a director of Tax Research LLP. Originally published at Funding the Future
Climate change poses a serious threat of making homes throughout Britain uninsurable, and the government currently lacks a coherent strategy to address the issue.
Increasing occurrences of floods, heat waves, droughts, wildfires, and rising sea levels are driving up insurance claims. As premium costs escalate, certain risks may become untenable for private insurers to accept. Areas in England prone to flooding, such as the Severn Valley and parts of South Yorkshire, are already witnessing rising costs and diminishing coverage options, while the existing government scheme, Flood Re, has limited scope and duration.
This situation is critical. A house that cannot be insured loses its ability to be mortgaged, and a non-mortgageable property cannot command its expected market price. Consequently, homeowners may find themselves trapped in negative equity, causing entire neighborhoods to become virtually unsellable, resulting in a climate-change-induced property crisis in the UK.
This video delineates why private insurers cannot mitigate a macroeconomic risk of this magnitude, explaining why government intervention is necessary as the insurer of last resort. It emphasizes the urgent need for measures such as flood protection, transparent risk disclosures, and prohibition of construction in flood-prone areas to prevent an environmental crisis from morphing into an economic one.
This is the audio version:
There is no Debate Ammunition for this video as I did not have time to make it.
This is the transcript:
Will climate change make your home uninsurable? This is no longer a distant concern—it’s a pressing issue we must address now.
Floods, heatwaves, droughts, wildfires, and even rising sea levels are increasingly frequent events. While we recognize the risks, the most significant threats might not be to our homes directly; instead, they may become uninsurable. When properties cannot be insured, they cannot secure mortgages, which hinders their marketability and can lead to personal crisis for homeowners.
Insurance serves as a linchpin for the housing market. Most people require a mortgage to purchase a home, and lenders mandate building insurance to safeguard their loans. Unavailability of insurance would complicate the mortgage process, making it difficult to sell homes at anticipated prices. Consequently, homeowners may find themselves trapped as a result of this situation, creating a monumental issue.
Climate risks are thus introducing new property uncertainties, and these developments are beginning to resonate in financial markets and even central banks. Issues like winter flooding, droughts, subsidence, wildfires, and rising sea levels not only threaten our homes physically but also increase the likelihood of insurance claims. As claims rise, so do premiums, leading private insurers to potentially withdraw from high-risk areas.
Certain communities in England are already feeling the impact. Flood-prone regions are witnessing surging insurance costs and diminishing coverage. The government’s Flood Re scheme, while helpful, has significant limitations in scope and duration. As a result, climate change is projected to influence the insurance and mortgage markets and housing prices well before disasters occur. However, it is the threat of these disasters that is prompting the necessary changes. Recent events indicate that wildfires are becoming an increasingly real threat in both the UK and Europe.
The challenges we’ve encountered might be just the beginning. Climate change could ensnare individuals in financial traps. To reiterate, homes that cannot be insured face difficulties securing mortgages, and properties lacking mortgages are challenging to sell, resulting in plummeting prices. Homeowners may enter negative equity situations, meaning their mortgage exceeds their home’s value, preventing their exit. Entire neighborhoods could also become essentially unsaleable.
The prospect of climate change-induced property blight is real in the UK, and no market-based solution exists. This is a macroeconomic issue, necessitating government intervention.
Markets are designed to appropriately price risk, not absorb limitless and unpredictable losses. As climate risks escalate, private insurers will either raise premiums or withdraw coverage, a typical response from private-sector firms to mounting challenges. Hence, it is crucial for the government to step in as the insurer of last resort, providing the needed coverage for homeowners so they can live with the assurance of protection against disasters and retain mobility in their housing choices.
The government must assume this role and formulate a comprehensive plan promptly because the issue extends beyond mere insurance; it’s about addressing real and pressing environmental challenges.
Investments in flood protection, drainage, and wildfire prevention are essential. The government should enforce honest climate risk disclosures upon property sales, but such mandates are currently lacking. Furthermore, it should strive to enhance building standards where possible.
Avoiding construction on floodplains is critical; this is a risk we can no longer afford to take.
In summary, the government needs a long-term strategy for managing climate risks in insurance. Existing backup flood insurance provisions should expand to cover those currently at risk, acknowledging that this will be a persistent challenge for the foreseeable future.
The implications extend far beyond insurance. Climate change has the potential to reshape the housing market in Britain, leaving thousands unable to sell their homes. This could lead to significant financial crises alongside environmental disasters. Banks might also grapple with risks when a vast portion of their mortgage portfolios becomes compromised.
Unfortunately, the government currently lacks a transparent strategy to tackle these pressing issues. Silence on the topic is unacceptable when urgent conversations about risk management are necessary. These challenges are real and profoundly impact every homeowner involved, and indecision is no longer an option. Although Andy Burnham may be new to his role, he must confront long-standing problems. The urgency for action has never been clearer.
