As the UK Met Office predicts the first chance of a 1.5 °C[i] year in 2024, the challenge of underwriting changing environmental risks grows. Extreme weather events are becoming more frequent with heatwaves, wildfires, floods and droughts predicted to continue[ii]. Worryingly, recent reports suggest that London and other cities across the UK are underprepared for the consequences of climate change[iii] and flood resilience is being eroded by poorly maintained defences[iv].

To minimise insured property losses, insurance providers must remain vigilant to the risks. This means monitoring the potential for losses at a macro level, but also putting a ‘watching brief’ at postcode or area/region level as insurance professionals go through the underwriting process.

It is an essential responsibility of insurance underwriters to assess diverse factors and information for making well-informed decisions regarding the acceptance or rejection of insurance applications. This involves determining appropriate premiums and establishing the terms and conditions of insurance policies. Yet, as events of the last few years have shown, insurance professionals must expect the unexpected when it comes to the UK climate.

In the space of just nine days last year, storms Dudley, Eunice and Franklin brought a damaging mixture of extreme wind, inland flooding, snowfall and rain-triggered landslips. October and November then witnessed Storms Babet, Ciaran, and Debi, with Association of British Insurers (ABI) estimates putting total costs from the last trio of storms at £560^[v] million. The cost of damage is on the rise as 2024 kicked off where 2023 ended, more recently with Storms Isha and Jocelyn. This demonstrates the need for a clear view of key risk data for perils – not only to manage business that is already on the books of insurance providers to mitigate losses, but also to improve accumulations management when a policy is in the process of being underwritten.

Within the framework of underwriting guidelines, insurance professionals must consider accumulation exposure, whether it pertains to risks such as flood, explosion, fire, and more. Yet a property can change risk profile at the flick of a switch, along with its potential underwriting profitability. As perils can change so quickly and with growing unpredictability, more and more underwriters are monitoring risk in real-time.

Geospatial data visualisation tool LexisNexis MapView® offers “Monitored Zones”, allowing underwriters to designate specific areas or regions for continuous monitoring of potential changes during the underwriting process. This monitoring occurs automatically, tracking alterations in the designated zone, such as shifts in accumulation. Warnings are promptly issued if the monitored data surpasses predetermined thresholds, supporting a vigilant approach to risk management. Monitoring zones can trigger automatic responses through connections to software houses or IHP platforms to make quick decisions when specific events are occurring.

As the UK climate continues to challenge the property insurance market, geospatial data intelligence is critical for accurate risk assessments and for managing the risk profile of a property book.  Just as importantly, precision-pricing based on real-time geospatial information means property owners who live in an ‘at-risk’ area can still receive a realistic quote and not be left out in the cold when it comes to accessing cover.

[i] https://www.metoffice.gov.uk/about-us/press-office/news/weather-and-climate/2023/2024-first-chance-of-year-above-1.5-c-say-climate-scientists

[ii] https://www.eea.europa.eu/en/topics/in-depth/extreme-weather-floods-droughts-and-heatwaves

[iii] https://on.ft.com/4b2WxJG

[iv] https://committees.parliament.uk/committee/127/public-accounts-committee/news/199357/flood-resilience-eroded-by-poorly-maintained-defences-with-government-in-the-dark-on-progress/

[v] https://www.abi.org.uk/news/news-articles/2023/12/weathering-the-storm/#:~:text=These%20estimated%20payouts%20compare%20to,and%20Jorge%20in%20February%202020.

Content provided by Richard Toomey, vertical market manager, LexisNexis Risk Solutions, Insurance