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Climate Change - Surge Year for the Insurance Industry


Over the course of this record-breaking summer we have seen the highest ever temperatures in the United Kingdom, sparking large wildfires and even melting runways at airports. Climate change is well and truly baring its teeth for all to see and this is having a significant effect on the insurance market. Insurers are facing an increased number of extreme weather events in both the winter and the summer which will likely only continue in the years to come.

A big outcome of the increase of global temperatures is the increase in subsidence claims. By all accounts in the market, 2022 is likely to be a surge year where the insurance market faces a huge increase in subsidence claims. In 2018, the number of subsidence claims across the market were 400% higher than the previous year.

It is believed that the levels of dry soil in 2022 are in line with the previous surge years of 2003 and 2018, so the insurance industry is bracing itself for the subsequent increase in claims.

The annual increased numbers in claims are likely to endure as temperatures continue to rise. It is likely that the insurance industry will see more frequent surge years and thus become an increasing challenge for insurers.

In addition, at Keoghs, we are seeing an increased number of claims in different parts of the country. Traditionally a peril limited to London and the South East, we are seeing increasing numbers of claims moving further north in places such as Yorkshire and the North East. This trend is something to consider in the years to come, and one we will be watching with interest.

COP26 and the Environment Act 2021

In October - November 2021, the COP26 conference took place in Glasgow with much fanfare and media attention where attending nations agreed to the Glasgow Climate Pact.

Immediately following COP26, the Government passed the Environment Act 2021 to bring into law the principles towards addressing climate change. These included net zero by 2050, a cap of 1.5 degrees in increased temperatures, protecting public health relating to air pollution and targets on limiting biodiversity loss.

Trees are vital in their fight against climate change in that they remove CO2 from the atmosphere, they cool the air, reduce flooding and improving physical and mental health. This is particularly the case in respect of urban trees. However, as we know, tree roots are a major cause of subsidence damage and often removal is the only way in which to abate any damage.

This creates a massive area of conflict to insurers and practitioners in subsidence cases where trees need to be removed but there is a Government target to keep trees in situ. This is especially the case where trees are under the ownership of a local authority.

Under section 102 of the Environment Act, local authorities have a general duty to conserve and enhance biodiversity. Given the significant impact of trees on biodiversity, this will naturally create pressures in respect of the removal of trees even in cases where they are causing damage.

More specifically to the felling of trees, the Environment Act creates a new ‘duty to consult’ the public under section 115. For “street trees” on an urban road, the local highway authority must consult with the public before felling any trees. It is common for there to be a significant amount of public interest when urban trees are to be removed and therefore this will likely create significant pressure on local authorities to prevent the removal of trees.

An additional provision is that any approved planning permission application is on the condition that a biodiversity gain is met. This could significantly affect any applications to remove a tree preservation order as it will be difficult to meet a biodiversity gain. It may be that local authorities decide to place more tree preservation orders on trees in order to protect from felling.

With the advent of climate change there will be a large increase in subsidence claims, however there are going to be additional challenges in effecting the removal of vegetation relating to environmental legislation.

In the years to come there will be increasing challenges for all practitioners and the market needs to work together in order to negotiate the changes in the climate and in legislation.

For further information, please contact Matthew Kirk. Matthew is the lead lawyer of Keoghs subsidence and tree mitigation team. The team was set up in January 2022 and, within it, has vast experience at dealing with claims involving subsidence.


Matthew Kirk

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