In December 2024, the American Richard Z Wimmel received a letter from his insurance company. The message: His home in a fire-ravaged part of California is no longer insurable. The risks are too great.
And he is not alone. The New York Times, which described the fate of Richard Z. Wimmel, reported last December that 1.9 million Americans had their insurance policies canceled. When major fires hit California last winter, thousands of victims were uninsured.
Now the financial regulator is warning because Sweden faces similar risks, albeit on a much smaller scale. Houses in areas with a high risk of flooding are particularly at risk.
– Climate change will most likely impact homeowners insurance prices, we can clearly see that, says Emilia Högquist, head of sustainability at the Swedish Financial Supervisory Authority.
According to a series of articles in DN, the authority announced a year ago that it would examine how climate change affects Swedes’ insurance coverage through confidential interviews with insurance companies.
Now the test is completed – and the result is clear. The climate crisis is already having consequences for Swedes’ wallets.
The first effect is that premiums are becoming more expensive due to the ever-worsening extreme weather conditions. According to reinsurance company Swiss Re, the cost of natural catastrophe insurance worldwide exceeded $100 billion last year for the sixth consecutive year.
The same trend can also be observed in Sweden. In a report last October, industry association Swedish Insurance said that natural damage now often costs over a billion crowns a year – roughly doubling from just over a decade ago.
– With such an increase it is clear that premiums must be increased. It is also clear that flood damage has increased the most, says Staffan Moberg, climate expert at Swedish Insurance.
It is mainly the more powerful one the precipitation that creates problems. The extreme downpour in Gävle in 2021, Storm Hans in 2023 and the severe flooding in Jönköping county in 2024 are considered particularly costly events for Swedish insurance companies. But rising sea levels along the coast of southern Sweden and higher runoff in waterways also increase the risks.
So far, the increasing costs have been borne by the entire insurance collective. But now that seems to be changing, the financial regulator has found.
This applies to insurance in the event of natural damage
Natural damage is currently included in all home insurance policies as long as it is sudden and unforeseen, with certain exceptions:
● If there is heavy rain, it must rain at least 1 mm in a minute or 50 mm in a day.
● Damage caused by inadequate drainage is not covered.
● Insurance also covers damage caused when water from a stream, lake or the sea enters the home – but not erosion damage, as erosion is an ongoing process.
● Damage to the property, trees, bushes or greenhouses will not be compensated.
For floods, the deductible is often higher than for other types of damage, often 10 percent of the amount and at least SEK 10,000.
Source: Swedish Insurance.
Several insurance companies have told the authorities that they are considering differentiating premiums, not only at the area level, but also for individual houses. The houses with the greatest climate risks can therefore expect the greatest cost increases in the coming years. According to the financial regulator, in the long term this could lead to “consumers residing in high-risk areas receiving significantly increased insurance premiums”.
For people living in high-risk areas, this can result in a double financial blow. Firstly, insurance costs have risen – in the worst case, so high that “consumers are refraining from taking out insurance”. Then the value of the house decreases as a result of the increased risks.
Nevertheless, welcome Finansinspektionen supports such a development because it “can help consumers become more aware of the risk of natural damage to which their homes are exposed.”
– We need to raise consumer awareness of the risks. It is important for homeowners to find out how at risk their own homes or areas are and what measures can be taken to reduce the risks, says Emilia Högquist.
Check valves can protect the home
One measure that both the Financial Supervisory Authority and Swedish Insurance emphasize is the installation of so-called check valves. Since rainwater in Sweden often flows through the sewage system, heavy rains can cause wastewater to get into houses – the fact is that so-called backwater damage in floods accounts for over half of the damage costs. This damage can often be prevented with check valves that prevent wastewater from entering homes.
However, individual homeowners cannot manage all the risks themselves, the financial regulator points out – much broader and more comprehensive measures are also needed to adapt Sweden to the new climate.
According to the authorities, if this does not happen, there is a risk that residents of particularly vulnerable areas will find it difficult to take out insurance at all in the long term. As an example, Finansinspektionen cites areas threatened by rising sea levels, where rapid sea level rise “can limit access to household contents insurance protection against natural damage”.
Living space that cannot do that If the house is insured, it risks a significant loss in value, because a house that cannot currently be insured often cannot be mortgaged.
– That would be serious, says Emilia Högquist.
However, she emphasizes that we are not there yet – insurance coverage for Sweden is currently good. But she fears that adaptation to the increasing risks is progressing too slowly.
– All companies emphasize this. Society must adapt to the climate to manage the risks we face.
Read more:
Map: Heavy rain hits ten cities
Climate risk mapping was abolished – then came the downpour
The experts: How to protect yourself from torrential rain
