Will climate change make your home uninsurable? | Amy Barnes

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When the wildfires broke out in Los Angeles, California earlier this year, reports started coming out about insurance companies pulling back coverage from the people who needed it most. This trend is only expected to increase. as companies try to remove as much risk as possible. In her talk, climate risk advisor Amy Barnes explains why we need to reframe risk insurance as a warning bell. She says adaptation and smarter tools can help us get ahead of disasters and invest in resilience.

before it's too late. When I first joined the insurance industry, I realized that telling people about it was the fastest way for them to lose interest. Fortunately, that's changed. Risk is so much higher on people's personal and professional agendas. We know that it pays to manage risk. And my industry, our ability to price risk means that we have tools and products that can give a signal as to how we might adapt to climate change.

So when I joined this industry, I knew nothing about it. But in my first week, I learned its role in a modern economy. Aeroplanes wouldn't fly. surgeons wouldn't operate, and Taylor Swift would not go on tour without access to insurance. In fact, very few people will take on a major financial commitment without it. It works because the losses of the few are paid for by the many.

making risks manageable. And so banks rely on insurance, and if anyone here has built a wind farm or bought a home, the banks will have required you to have insurance in place. In fact, many, maybe even most financial transactions are contingent on insurance being in place. And so insurance is the lubricant of the financial services industry, and without insurance, you'll struggle to access debt.

Last bit of the insurance lesson, I promise. Premium's price risk. So the cost of the insurance gives an indication of how likely it is that the insurer thinks that you will suffer a loss. And we all know this. Young, inexperienced drivers pay high insurance premiums. Yet on my home, if I install a burger alarm or locks on my windows, I know the cost will be lower.

So the premium indicates how likely it is you will suffer a loss, but there are things that we can do to reduce the risk and reduce the cost. So what's any of this got to do with climate change? Well, importantly ...

insurance only works while extreme weather remains a risk. If it becomes near certainty, insurance becomes unaffordable and potentially not available. So we have an industry whose core competency is pricing risk, telling us that in places, the cost of risk is too high for people to pay. And at the same time, we have a financial services industry that relies on insurance.

to provide loans which in turn make the financial system work. Now, the signals are really clear. We're told that in Australia, by 2100, one ... 1.3 million homes will be uninsurable due to extreme weather. And in New South Wales, that's 90 percent of people's homes. In New Zealand, 10,000 homes uninsurable by 2050.

And across the world in Canada, the Bureau of Insurance says that nearly 10 percent of homes are already close to uninsurable and represent 90 percent of the industry's losses. Why? Extreme weather due to climate change. Now, since the 1970s, the cost of extreme weather events has increased every decade. Last year, the costs were $320 billion. And the LA wildfires on their own, $150 billion.

But it's not just severe losses. Sticking in the US, last year, there were 27 incidents with costs of over $1 billion. That's more than two a month. So the equation has flipped. It's no longer ... just the losses of the few, it's now the losses of the many. And as a result, we're hearing stories of people struggling to access insurance. And if you can't get insurance for your home ...

your house is worth less and you'll struggle to sell. Data in the UK shows that homeowners with no access to flood insurance typically lose 10 to 30 percent of the home's value. In Florida, that's 20 to 40 percent. And 30 percent of mortgage foreclosures in the US are expected to be due to extreme weather, due to climate change, by 2035.

So there's an indication of people saying that insurance has failed, but it is not. It's just telling us that the costs are too high to bear. Simply put, without access to insurance, people will struggle to secure debt. They will struggle to sell their homes, they will struggle to invest in their businesses. And we're seeing this happen due to climate change. I'm afraid there's another challenge. Loans and mortgages are normally taken out for long periods. It may be 20 years or more.

And so you may build your wind farm or buy your home, assuming that you can use insurance to manage your risk. Yet over time, the frequency and severity of extreme weather events means that insurance becomes unaffordable.

And so you've lost a key tool in your financial resilience toolkit, and you're more likely to default on your loan. And so we're also in a situation where the finance industry are seeing asset devaluations, they're seeing increased chances of default, and so we could have liquidity crunches in some areas where investors choose to exit the areas with the most risk.

So it's clear we need to act. And the scientists have been telling us this for a really long time. It's just the finance industry is saying it now, too. Beyond cutting emissions, which we need to do, there are things that we can do. One of the fantastic things about having a price for risk is it incentivizes you to invest in resilience. And we know that investments in preventative measures have a payback of $10 to $13 for every dollar spent.

So as an industry, we need to do far more to tell people that prevention saves money. Now, the cheapest time to invest in resilience ... is when you build new things. We should only build resilient new structures. But 80 to 85 of the buildings that exist everywhere in the world today will still be here in 2040. So that means we also need to retrofit.

Some of those actions may be things like lifting electrical equipment off the ground floor of buildings to reduce damage from flood, or you may need to replace the shingles on your home with a living roof to make you more resilient to wildfire.

But these cost money, and some of the interventions cost a lot of money. Now, there are grants and there are resilience bonds that can help with this, but their scale is woefully inadequate. So as an insurance industry, We need to do more to promote preventative measures so that we're reducing the risk now and saving for the future.

There are lots of roles for insurance to support climate change. One other that I want to mention is I've been talking about the impact of insurance on property damage. But there's a type of insurance called parametric insurance. that supports people in stresses like extreme heat or water stress. And right here in Kenya, we have a program supporting small-scale farmers. So in the events that the rains don't come and the crops fail,

or in India, where extreme heat means it's unsafe to work in the market, the micro-insurance can replace people's livelihoods. And these insurances are impacting hundreds of thousands of people's lives globally for the better. But these insurances, too, will become unavailable and unaffordable if the risk becomes a certainty. So insurance is doing exactly what it's supposed to. It's pricing risk, and it's giving us a warning sign.

that assets may be worth less and credit could be less available as banks either refuse or charge more for credit because insurance isn't there, which means one of the key tools in our toolkit may not be available. when we need it most. So what is my vision for insurance? I don't want it to be seen as a problem. I want it to be part of the solution.

Insurance is a sophisticated financial tool that provides us all with an incentive to act as a society. And that's what we need to do. We need to invest in adaptation and resilience so the risk remains manageable. enabling people and businesses to continue to invest in their future. Thank you. That was Amy Barnes at the TED Countdown Summit, Nairobi in Kenya in 2025. If you're curious about TED's curation, find out more at ted.com slash curation guidelines.

And that's it for today. TED Talks Daily is part of the TED Audio Collective. This talk was fact-checked by the TED Research Team and produced and edited by our team, Martha Estefanos, Oliver Friedman, Brian Green, Lucy Little, and Tonsika Sungmarni. This episode was mixed by Christopher Fasey Bogan. Additional support from Emma Taubner and Daniela Balarezzo. I'm Elise Hu. I'll be back tomorrow with a fresh idea for your feed. Thanks for listening.

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