Context
The FCA has published a detailed new web page in relation to climate adaptation and resilience. The web page is to provide information for regulated firms on how physical risks from climate change, such as flooding, may impact the property insurance and mortgage markets and how the FCA can help.
Key points to note and next actions
- Climate change is already affecting UK financial services.
- The Environment Agency estimates that 6.3 million properties in England are at risk of flooding. By 2050, that could rise to 8 million.
- Annual flood damage in the UK is estimated to cost £3.3 billion and could rise to £4.5 billion by 2050, according to the Climate Change Committee.
- Additionally, 346,200 home insurance policies were placed into the Flood Re scheme in 2024/25 – a 20% increase on the previous year.
Physical climate risks fall into two broad categories, as defined by the International Sustainability Standards Board (IFRS S2Link is external):
- Acute risks – sudden, event-driven disruptions such as floods, wildfires, storms, and heatwaves.
- Chronic risks – gradual, longer-term shifts such as rising sea levels, sustained temperature increases and changing rainfall patterns.
The FCA has identified five key risks so far, and provides brief commentary in relation to each:
- Reduced access to insurance.
- Insurance markets function less effectively.
- Consumers find it harder to obtain mortgages.
- Existing homeowners face higher costs and less choice.
- Markets find it harder to accurately price climate risk.
In relation to its work so far, for insurance, the FCA states that it has reviewed policy wording on key risks including flood and storm damage. Its 2025 review of home and travel claims handling highlighted the importance of clear policy information, helping consumers understand what is and is not covered, and delivering fair and transparent outcomes when customers make a claim. The FCA is also supporting the ABI’s work on storm claims.
The web page includes six suggestions for what insurers should consider, and sets out ways in which the FCA can help.