Geneva Association Calls for Mortgage and Property Valuation Reforms
The housing sectors in advanced economies are facing increasing exposures and vulnerabilities to extreme weather events, along with growing challenges related to insurance availability and affordability. A new report from the Geneva Association recommends significant changes to property valuations and mortgages, as well as the implementation of government-backed insurance pools, to encourage homeowners to enhance their resilience to climate-related risks.
Rising Insurance Losses and Challenges
“Since 2020, annual insured losses have consistently exceeded US$100 billion and are projected to surpass US$200 billion in 2025,” said Maryam Golnaraghi, the Association’s director of climate change and environment and lead author of the report. Golnaraghi noted that more than half of these losses since 2020 were driven by localized events such as floods and wildfires, rather than large-scale disasters like hurricanes and winter storms. “These events can occur anywhere,” she emphasized.
The increasing property exposures are also attributed to socio-economic factors, including the growing number of people living in high-risk areas, inadequate building codes, aging infrastructure, and the destruction of natural buffers. Insurers have focused on risk-based pricing to reduce their property exposures, resulting in “severe insurance affordability pressure,” according to Golnaraghi.
Structural Changes and Recommendations
The report proposes significant structural changes in property valuations and mortgage systems worldwide. One key recommendation is that mortgage approvals should include “robust monitoring of borrowers’ annual insurance” as a condition. This would improve data on property insurance challenges and inform further preventive measures.
The report also advocates for the wider use of digital tools to help homeowners assess and improve their resilience to extreme weather. For instance, Australia’s government-funded Resilient Building Council launched a free bushfire self-assessment app in 2023. By early 2024, over 6,500 households had used the app and collectively spent AUS$44 million on upgrades, subsequently receiving lower mortgage rates and insurance discounts.
Property Risk Data and Risk-Based Land Zoning
Golnaraghi stressed the need for more accessible and widely available property risk data. “Governments should implement mandatory disclosure laws to provide homeowners with critical risk information,” she said. The report also calls for governments to adopt more risk-based land zoning to identify areas unsuitable for building and encourage the removal of properties from these zones through buyouts.
Natural Barriers and Insurance Pools
The report recommends that governments use legislation to restore natural barriers to natural catastrophes. For example, the Netherlands’ “Room for the River” program converted land once used for development into floodplains. Additionally, the report suggests the use of government-backed insurance pools, but emphasizes that these pools must focus on resilience rather than just providing coverage.
Golnaraghi noted that many existing insurance pools around the world fail to prioritize resilience, often allowing people to live in high-risk zones due to solidarity-based principles. “The issue is then, are we investing enough in resilience so that over time we can pass on these properties back to the private insurance markets?” she questioned.
The Geneva Association’s Safeguarding Home Insurance report aims to transform the way insurers and brokers engage with the property insurance market by promoting a more resilient and sustainable approach to property ownership and insurance.
