Geneva Association Urges Reforms to Mortgages and Insurance Amid Rising Extreme Weather Risks
The housing sectors in advanced economies are facing increasing vulnerabilities to extreme weather events, coupled with growing challenges related to insurance availability and affordability. A recent report by the Geneva Association calls for transformative changes to property valuations, mortgage systems, and insurance frameworks to incentivize homeowners to enhance their resilience against 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,” stated Maryam Golnaraghi, the Association’s director of climate change and environment and lead author of the report. Golnaraghi emphasized that more than half of these losses since 2020 were driven by localized events such as floods and wildfires, rather than large-scale catastrophes like hurricanes. “These events can occur anywhere,” she warned, highlighting the widespread nature of the risk.
The increasing property exposures are not only driven by climatic factors but also by socio-economic elements. Golnaraghi pointed out that factors such as the growing number of people living in high-risk areas, inadequate building codes, aging infrastructure, and the destruction of natural buffers are exacerbating the problem. In response, insurers have focused on risk-based pricing to reduce their exposures, resulting in “severe insurance affordability pressure.”
For instance, in many US and Canadian states, 10% of homes are exposed to severe flood risks, often leading to unaffordable or unavailable property coverage. In Australia, 15% of properties face severe affordability pressures, where homeowners may need to spend over a month’s annual income on property insurance.
Structural Changes and Recommendations
The Geneva Association’s report proposes several structural changes to address these challenges. One key recommendation is the integration of “robust monitoring of borrowers’ annual insurance” as a condition for mortgage approvals. This would improve data collection on property insurance challenges and inform preventive measures.
The report also advocates for the wider use of digital tools to help homeowners assess and enhance their resilience to extreme weather. For example, 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, collectively investing AUS$44 million in upgrades. These homeowners subsequently received lower mortgage rates and insurance discounts.
Other recommendations include:
- Increased accessibility of property risk data through mandatory disclosure laws
- Adoption of risk-based land zoning to identify and manage high-risk areas
- Restoration of natural barriers through legislation
- Establishment of government-backed insurance pools with a focus on resilience
Golnaraghi emphasized that while some progress has been made in resilient home construction, further incentives are needed to boost market demand and local adoption. The report highlights initiatives such as a training center in California promoting building systems resistant to hurricanes, floods, and fires.
Challenges and Future Directions
One significant challenge identified in the report is the need for government-backed insurance pools to focus more on resilience. Golnaraghi noted that many existing pools, due to solidarity-based principles, allow development in high-risk zones, contradicting risk reduction 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 recommendations aim to transform the property insurance market by promoting resilience and addressing the growing challenges posed by extreme weather events. By implementing these changes, the report argues that insurers, brokers, and policymakers can work together to create a more sustainable and resilient housing sector.
