Energy & Climate
Unequal support for flooding victims
New report highlights funding for England’s flood protections often prioritises areas with higher value homes.
14 October 2025
A new report from WWF reveals that the climate and nature crisis is undermining the foundations of the insurance system.
The report, ‘Tackling the Insurance Protection Gap’, evidences a growing ‘insurance protection gap’ across multiple countries.
As extreme weather events become more frequent, severe and harder to predict, insurers are forced to increase premiums, restrict coverage or withdraw from high-risk areas.
From homes to agriculture or insurance against supply chain disruptions, the protection gap is widening, leaving people and businesses with either higher bills or less – or even no – protection. Insurers are increasingly sounding the alarm on the risks to their operations.
In 2025, the United Nations Office for Disaster Risk Reduction estimated the annual disaster risk costs for 2023 were around £1.7 trillion.
In the UK, increasingly frequent extreme weather events have meant weather-related claims are rising.
Tenbury Wells in Worcestershire has been flooded seven times in four years times, with flooding becoming an almost annual event. The result is that insurers cannot offer cover.
Governments need to address the root causes of risks, as well as managing the protection gap in the short term. The Climate Change Committee has repeatedly found the UK government’s national adaptation planning to be inadequate.
The report cites evidence that every £1 invested in climate resilience can save up to £13 in avoided losses.
Flood Re, a joint initiative between the UK government and insurers, is designed to maintain the affordability of flood insurance for high-risk homes.
The scheme will end in 2039 when the UK insurance market will return to fully risk-reflective pricing for flood insurance, but it is covering an increasing number of properties, and efforts to increase resilience have not progressed as needed.
Flood Re only reinsures homes built before 2009 and doesn’t cover businesses. There is no equivalent reinsurance scheme to cover damage from other types of extreme weather such as storms, wildfires and drought.
‘The insurance industry is the canary in the coal mine for the entire financial system’s exposure to the impact of climate change and nature loss. We all need protection from risk: without insurance, extreme weather events can become financial disasters for individuals, businesses, farms and communities.
‘Our insurance industry employs 300,000 people, earns £89 billion per year and manages investments of £1.4 trillion. We need the UK Government to improve risk assessment and adaptation planning, continue to reduce carbon emissions, and invest in nature to build resilience so we can maintain viable insurance markets.’
ED STEEDS
WWF’s senior finance policy adviser
Insurance is a cornerstone of prosperity. Reduced coverage combined with growing climate risks threatens household finances, the economy, the financial sector and government budgets.
Insurance is dependent on a stable climate and adequate resilience to extreme weather, including from healthy ecosystems. Healthy ecosystems materially reduce flood, heat and storm damage and are better value than engineered defences. However, these ecosystem services are rarely valued in loss estimates or integrated into insurance pricing.
The report found that the climate and nature crisis is driving up losses and damages from extreme weather events.
In 2025, the United Nations Office for Disaster Risk Reduction estimated the annual disaster risk costs for 2023 were around £1.7 trillion.
Uninsured losses are surging; in 2024, global losses from natural disasters reached $318 billion, yet only about one-third of these losses were insured.
Homeowners are at risk. The average cost of home insurance in the UK increased by 19% between 2023 and 2024.
Over 1.9 million home insurance policies have been non-renewed in the USA since 2018.
The report also finds evidence of impacts on health, agricultural, liability, commercial and infrastructure insurance markets.
Climate-related insurance protection gaps are entrenched or increasing. Swiss Re estimates that less than half of losses from natural catastrophes are insured – with protection gaps exceeding 90% in many emerging economies.
Without insurance, homes become un-mortgageable, property values plummet and government budgets suffer.
‘The insurance protection gap leaves people vulnerable as extreme weather events hit people hard. With over half of climate-related losses uninsured globally – and more than 90% in developing countries – this is no longer just an insurance market issue, but a systemic threat to people’s livelihoods, economic resilience and even financial and fiscal stability.’
LAURENCE TUBIANA
Special Envoy to Europe for COP30
After the 2021 Ahrtal floods, Germany committed EUR 30 billion in reconstruction funds. Disaster relief spending by the US Government exceeded $110 billion in 2024, diverting resources from long-term resilience investments.
The International Monetary Fund found that a country’s vulnerability to climate change can have a direct effect on its costs of borrowing.
Healthy ecosystems materially reduce flood, heat and storm damages and can outperform engineered defences on a cost basis.
The risk of a large-scale flooding event can increase by up to 700% in areas affected by widespread deforestation.
However, these risk-reducing ecosystem services are rarely valued in loss estimates or integrated into insurance pricing — despite evidence that every £1 invested in climate resilience can save up to £13 in avoided losses.
New report highlights funding for England’s flood protections often prioritises areas with higher value homes.
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Climate change-fuelled extreme weather events disproportionately hit poor communities in 2025.
Extreme weather impacts cost more than $300bn in the US this year – significantly less than the catastrophic losses in 2024.
