The future risk and insurance landscape for claims

Introduction

Local government is no stranger to environmental and social issues; indeed, they are a focus of many of its powers, duties and initiatives.  Historically, local government has given these issues greater consideration than the private sector.

That said, environmental and social matters have recently started to be viewed through a different lens by both private and public sector organisations. 

Why this change?  Put simply, environmental and social factors have a much higher and more complex profile than before, increasing the potential claims exposure of public and private sector organisations.

The driving factors include:

• Increasingly unpredictable weather patterns, that disrupt operations and the operations of those on whom they rely.
• Significant new regulation to tackle climate and biodiversity issues, with roots in legislation like the Climate Change Act 2008 and the Environment Act 2021, that will necessitate significant change in operations and the operations of those on whom they rely. 
• Mandatory reporting and disclosure requirements that could expose poor preparedness to investors and competitors.
• Stronger preferences among stakeholders who, for a variety of reasons, are demanding better information and better performance from those with whom they associate, and who take a dim view of greenwashing. 
• Claimant law firms growing in confidence, especially in the context of bringing group actions with an environmental or social flavour.

The response that is emerging starts with better and more co-ordinated governance around the ability to identify the full range environmental and social risks, as well as opportunities, and then actioning them.  This is the essence of ‘ESG’.

ESG and Claims

The potential for legal claims, like many areas of local government, now needs to be looked at through the ESG lens.  Local authorities need to ask, considering the factors set out above, do they have the governance needed to be able to identify emerging environmental and social risks and claims threats? And indeed, are there any possible opportunities that might provide relief from those risks and threats in the future?

Local government is already becoming aware of the changing nature of environmental claims in particular.

• Climate change is, of course, affecting the claims that local government organisations are handling on a daily basis. More frequent and severe flood events have led to more flooding claims against highway and planning authorities. Hotter summers have led to more tree root subsidence claims. 2025 has been the hottest year on record and we are likely to see similar claims “surge” events as we did in 2018 and 2022 as a result. The greater frequency and ferocity of storms creates a greater risk for those who manage trees. Tree falls, resulting in injuries, fatalities and property damage, are increasingly common. Stringent risk assessment and inspection requirements mean that it is a trying time for local government when finances are under enormous pressure.
• New and evolving claims such as air pollution, taking into account the landmark Inquest Ruling in 2020 that the tragic death of Ella Adoo Kissi-Debrah was linked to air pollution, offer further challenges for the public sector. This is combined with new goals and regulatory enforcement around air pollution targets if not achieved. Invasive species risk and claims are evolving as climate change affects the growth of vegetation on the land managed by local authorities.

However, the consideration of claims risk issues – if it is done through an ESG lens - needs to go much deeper than reflecting on these current developments.

In particular, local authorities need to start thinking about:

• Whether direct climate factors could in due course lead to other types of physical risk, either to the local authority or to those on which it relies
  
• How the “transitional risk”, i.e. the risk to the local authority of the laws aimed at transition to a zero carbon, nature-rich economy, will play out, either for the local authority or for those on which it relies.  New energy efficiency rules in particular around the continued use of domestic and non domestic property certainly need to be watched, but there is so much more that will need to be monitored and actioned.
• How to avoid “greenwashing” risks, i.e. the risk to the local authority in issuing green claims without the relevant evidence to substantiate the same.  
• How to avoid being tarnished by bad actors in the supply chain on environmental and social issues.  Involvement with poor environmental or social performers can lead to embarrassment and, at worst, could lead to involvement in direct claims.
• What legacy environmental and social risk might have been inherited from historic former entities from which they were created.
• What extra matters need to be factored into the exercise of traditional local authority powers and duties to reflect the current state of law and policy on, in particular, the environment.  The recent planning case of R (on the application of Finch on behalf of Weald Action Group)) v Surrey County Council and others, shows that decisions can be overturned where a council fails to do so.

Conclusion

ESG is taking root across a broad swathe of organisations in the UK.  

Perhaps because new ESG reporting and disclosure obligations fall mainly on the private sector, we have heard so much more from them recently on improved individual approaches to environmental and social issues than in the past.  

Far less has been heard from the public sector, perhaps because reporting and disclosure requirements are not forcing leadership’s hand to the same extent, or because public sector bodies are starting their considerations from a more advanced position.  

As the above makes clear, and make no mistake, there is plenty that local authorities really should be considering.

The message for local authorities is to ensure that governance around environmental and social issues is fit for purpose as we enter a period that is widely expected to lead to exposure to additional environmental and social risk.