It’s safe to say that when they were assigning weather conditions at school, the UK was probably absent. Dark mornings, paltry drizzles and plastic clad walks are as much a daily ritual as complaining about them to your coworker is. No matter what happens during the day, the downpour will be there to greet you when it’s time to go home and there is nothing you can do about it.
As common as rainy days may be, 2026 had the fourth wettest January since records began. Rain fell for 25 consecutive days, Flood warnings across the country neared one hundred and the year began as an example of the worsening climate crisis.
Now, an unexpected warning light has started to flash. One of the easiest ways to see the worsening effects of flooding is to see how it is affecting corporations and those tasked with protecting the bottom line. For decades, the search for profit has bred fossil fuel lobbies, overconsumption and climate skepticism. It enabled paths of least resistance at the cost of the natural world but now, like the snake that bit its own tail, flooding has started to threaten profits and the markets are responding.
Where is the water coming from?
Flooding is a twofold problem; a sudden increase in the amount of water and an inability to drain it away. As the atmosphere warms, melting ice caps discharge more water into the seas with coastal cities and towns being left to combat rising sea levels. Warmer air increases the ability of the air to hold moisture. When the rain falls, it is with greater intensity in a shorter space of time. As the ground becomes more saturated, the ground’s ability to drain the water decreases and the risk rises.
On land, construction inadvertently ‘seals’ the ground and hampers its ability to naturally drain water. Roads, parking lots and buildings reduce the porosity of the ground and have to be built with flood resilient infrastructure in order to suffice. Older developments without suitable infrastructure become underprepared and drainage systems become overwhelmed. Houses in low lying areas find themselves in ‘bowls’ with nowhere for the water to flow to. The outcome? Homeowners find themselves at risk of being unable to insure their homes at an affordable price and in many cases, at all. To the markets, areas at a high risk of flooding transform into ‘insurance deserts’ and insiders warn that “climate change is on track to destroy capitalism itself”.
Coverage favours predictable, uncorrelated and geographically distant events: it is what allows the premiums of the many to fund the claims of the few. These also happen to be the exact factors that climate change upends.
A market of risks
At the heart of the crisis lies homeownership. Often billed as the ultimate goal, ‘getting on the ladder’ is not a simple task. For the seller to sell and the buyer to get a mortgage to pay for it, a house needs insurance. Almost instantly, the aspiration of homeownership is thrust into the capital hungry market machine. To understand the climate emergency, first we have to make sense of insurance.
Stemming from its roots in ship owners who saw the potential to make money in betting on the risks taken on by seafaring merchants, insurance provides coverage to a person should certain events occur. Providers operate on the basic principle of profit; more money should come in than should go out. The money coming in is a ‘premium’ that is paid regularly while the money going out is a ‘claim’ that is paid when an event occurs. The smaller the risk of a claim, the more attractive it is to the provider and the greater the chance that they will provide insurance.
Profitability has created a number of ‘guides’. Coverage favours predictable, uncorrelated and geographically distant events: it is what allows the premiums of the many to fund the claims of the few. These also happen to be the exact factors that climate change upends. Flood vulnerable areas become hotspots for a single type of claim at one particular time, all in one area. As the effects of climate change compound over time, historical data becomes unreliable and the future increasingly harder to predict. The algorithms and models tasked with self preservation produce the same answer: “Do not insure (but if you do, make it really expensive)”. Houses and neighbourhoods begin to face inflated premiums or are outright denied insurance and the effects of climate change set in well before the flood.
The Domino Effect
Insurance’s link to the housing market can be best described as ‘asymmetric’. To banks, insurability is what assigns houses a large portion of their ‘value’. Despite it being a prerequisite for mortgages, they are both issued in completely different ways. While insurance schemes typically run year to year, mortgages can easily span 20 to 30 years. This means that while the insurance provider can change their coverage terms regularly, the bank ties itself to the property long into an unknown future without any idea of what its ‘value’ may be. If the coverage is withdrawn, the bank could well account for the loss in ‘value’ with mortgage repayment rates that can drastically swing month to month with the homeowner bearing the cost.
Then, the day comes. Unexpected rains or a river bursts its banks and within hours, the flood grows. With nowhere to drain, the only place for the water to go is deeper into the city. Water pours in through letterboxes and gaps in windows and a thick brown sludge covers all belongings. Homeowners are forced to evacuate at a moment’s notice or worse, trapped until help arrives. The cost of repairs will easily run into the tens of thousands, let alone the costs of getting by until the waters go down. Lasting damp and rotting structures will need to be repaired and the house refurnished. If they owned a local shop, the primary source of income may well have disappeared. Without insurance, these costs now have to be borne by the homeowner once again. As costs are stretched to their limits, when the time comes to pay the next month’s mortgage, the chance of a homeowner defaulting on the payment rises. Multiply this across neighbourhoods and the number of missed payments compounds. Unable to sell their houses and burdened with repair costs, a homeowner becomes a ‘mortgage prisoner’.
At the city and national level, the knock on effect grows further. Without insurance cover, the state has to step in to provide relief, meaning fewer funds for other essential services and flood preventative measures. In Wales, local authorities plan to purchase and demolish a set of uninsurable homes due to their inability to be protected from flooding. As climate change worsens, its effects spread wider.
Murky waters all around
Perhaps nowhere is this combination more potent than in the constituency of Boston and Skegness. Once the home of the British beachside holiday, it now stares at a similar fate similar to many of the country’s coastal towns. With the unreliability of seasonal income and an aging population, it is forecast to house nearly half a million mortgage prisoners by 2050, the most of any region. It is helmed in parliament by Reform UK deputy leader Richard Tice as he battles the “cult of net zero”. His solution to rising seas? ‘A bit of steel, a bit of cement’, ironically both being causes of the very problem. Climate denialism runs rampant throughout Reform UK with seven of the party’s councils scrapping net zero targets altogether, all while £55mn in flood defence funds have been pledged to Tice’s constituency since 2024.
Deprived constituencies like Tice’s are forced to pay an unspoken cost, the ‘Poverty Premium’. This stipulates that low income areas that have been under invested in and lack the adequate infrastructure will often have to pay a much higher cost to rebuild when disaster strikes. Someone that needs to track expenses on a monthly basis may not be able to afford the commitment to a direct debit payment system. In turn, standalone monthly payments result in higher total expenditure and the same coverage will come at a higher price.
This ‘doom loop’ of climate crisis and financial burden is not just a quirk of the insurance industry but one that is aided and abetted by it. Decades of insuring the risks associated with fossil fuel infrastructure, pipelines and shipping lanes have followed the same principles but in those cases, the costs are passed down to the consumer. The cost to insure a tanker through the Strait of Hormuz won't be absorbed by the energy companies, but by the person filling their car up and watching the LCD display at the pump skyrocket.
So where does this leave us?
The UK government introduced FloodRe as a temporary measure in 2016 to reduce the premiums of homeowners in flood zones. The scheme provides financial assistance for houses built before 2009 with the assumption that planning policy and building standards beyond this mark would compensate for the additional risk. This looks unlikely. Thousands of new homes continue to be built in at-risk areas with the threat of even more being ineligible for coverage when FloodRe expires in 2039.
Policy and technology aside, it does not change the bitter irony of the situation that the cause has become the canary in the coalmine. If these industries can be trusted to extract every penny from the natural world then they can certainly be trusted to protect themselves from losing any of it, not because corporations realised the real and damaging impacts of climate change but because a warming world…affects profits. Once again, the price of rising seas and a warmer world will be borne by the individual because the system was designed to protect the corporation. Maybe this time, the incentive to change may just be enough but make sure you have an umbrella nearby because this rain is going nowhere.