Climate Change Committee Report: Implications for UK Insurance Claims

The Climate Change Committee’s (the Committee) latest report, A Well-Adapted UK, (the Report) reinforces a stark reality for insurers: climate change is no longer a future risk but a current driver of claims frequency, severity, and volatility. Its findings - record heat, wettest winters, rising flood risk and widespread exposure to overheating point to a step change in how claims will emerge over the next decade. For insurers the implications are both operational and strategic.

Escalating property and casualty losses

The projected 45% increase in peak river flows by mid-century and the confirmation of record levels of rainfall and flooding signal sustained upward pressure on property claims. Flood-related losses are likely to become:

• More frequent, with repeat claims in high-risk geographies
• More severe, driven by deeper and longer-lasting flood events
• More complex, involving combined perils (surface water flooding, river overflow, sewer backflow)

At the same time, overheating risk across 92% of homes introduces a less familiar but growing source of claims. Heat-related damage, subsidence, material degradation, infrastructure stress, and fire risk linked to cooling systems are likely to increasingly appear in property portfolios. This could result in higher claims volumes during peak weather events, greater demand for specialist loss adjusting (e.g. subsidence, hydrology expertise) and increased litigation and coverage disputes where causation spans multiple risks.  

Emerging liability exposures

The Report’s recommendation to introduce maximum workplace temperatures is particularly significant from a liability perspective. Spain has taken the lead on this, setting a limit of 27 degrees for sedentary workers and 25 degrees for light physical work. Even without a fixed UK threshold, the direction of travel is clear. If implemented, this could drive employer’s liability claims linked to heat stress, dehydration, or workplace conditions, whilst placing greater financial and regulatory demands on employers to monitor and control the workplace.

There could also be an impact on occupiers’ liability exposures in public buildings (schools, hospitals, retail) with increased scrutiny of compliance with health and safety obligations. This is particularly relevant given the Report calls on government to introduce air conditioning and other cooling technologies across schools and hospitals.

As extreme heat becomes more common, claimant behaviour is also likely to evolve, with greater willingness to pursue claims tied to environmental conditions. This mirrors trends already seen in other jurisdictions and may lead to test cases clarifying employer duties in high-temperature environments.

Inflation, demand surge and claims cost escalation

With adaptation measures requiring approximately £11 billion per year of investment, the market is expected to experience sustained demand. The impact for claims is likely to include repair cost inflation, particularly for materials and skilled labour and longer claim lifecycles, as capacity constraints delay claims settlements. It must also be anticipated that there will be increased indemnity spend, especially on large loss and complex claims. Department for Trade & Industry figures indicate that prices were around 2% higher in January 2026 compared to the previous year.  

Protection gap and affordability challenges

The Committee’s focus on preventing the insurance protection gap, which was 29% in 2024, compared to an average of 22% in the past decade, from widening highlights a critical tension. Premiums could rise in response to exposure; some risks may become uninsurable or underinsured and claims costs may increasingly fall outside the insurance system.  

Flood Re and market stability

Uncertainty surrounding the 2039 end date of Flood Re introduces a further layer of claims risk. Without clarity, claims disputes may increase where coverage becomes restricted or transitional arrangements apply. 

Shift from recovery to resilience

A consistent theme from the Committee is the need to move beyond claims as a purely reactive function. There is pressure on insurers to support risk mitigation, provide risk engineering and advisory services and encourage behavioural change among policyholders. For claims teams, this means closer integration with underwriting and risk management, using claims data to identify emerging loss patterns, inform pricing and coverage decisions and support targeted resilience interventions.

Conclusion

The Report highlights a structural shift in claims risk driven by climate change. The combination of rising physical hazards, emerging liability exposures, and systemic pressures on infrastructure and affordability will reshape the claims landscape over the next decade.

For insurers, the challenge is twofold: managing short-term volatility in claims while adapting to longer-term structural change. Those that invest in data, expertise, and proactive risk mitigation will be better positioned to control loss costs and support policyholders in an increasingly complex risk environment.