An anonymous memo from senior U.K. and European insurers has warned that the global insurance industry will price, exclude and exit its way out of climate risk, leaving households, investors and taxpayers to pick up an impossibly large bill. Here is what the memo says, and what the evidence shows.

On 14 October 2026, the U.K. non-profit Inside Track published “ Sounding the Alarm ,” a memo written by current and recently departed senior figures from Europe’s leading insurers, reinsurers and brokers. They warn that physical climate risk is rising at a dangerous rate, and the industry’s response will push the losses onto regular people.

The memo’s most urgent warning compares the threat to the lead-up to the 2008 global financial crisis. A major increase in uninsured, high-risk properties, the authors say, could undermine the mortgage market much as sub-prime lending did before the crash. The result, the insiders write, will be “an increase in uninsured losses for which someone else will have to pay the price.”

Who Wrote It, And Why Anonymously?

Inside Track gives senior figures from various sectors a way to raise concerns about their industry without being named. The authors say they are not accusing insurers of malice: they argue the industry is simply following what short-term incentives reward. The memo also claims that in some firms, people who raise the issue of climate risk are coming under increasing pressure from their firms to downplay the threat, going as far as to ask staff to “manage down the numbers in order to avoid causing alarm and to keep getting deals done.”

The memo comes with a commentary from Lord Nicholas Stern, chair of the U.K.’s Grantham Research Institute at the London School of Economics, whose 2006 review concluded that climate inaction would cost far more than action . “The people who price risk for a living are warning, from the inside, that our models have underestimated the danger,” he said. “And that mispriced risk is building to potentially unmanageable levels.”

What Is The ‘Protection Gap’?

The protection gap is the difference between what disasters cost and what insurance pays out, and it is already large. Swiss Re—one of the firms that insures the insurers—estimates natural catastrophes caused $137 billion of insured losses worldwide in 2024 , while a further $181 billion went uninsured.

Europe’s gap is wider than many assume. The European Central Bank and EU insurance regulator EIOPA estimate that only about a quarter of climate-related catastrophe losses in the EU are insured. In Italy, Swiss Re puts the uninsured share at 78%.

The memo’s warning is that this gap is about to grow, because insurers will pull back from exactly the risks that are rising the fastest.

The memo describes a three-step playbook of insurance retreat, with all three steps already taking place across the U.S.

  1. Reprice. Premiums rise to match the risk. A U.S. Treasury study of more than 246 million policies found homeowners in the riskiest fifth of ZIP codes paid 82% more than those in the safest. Nationally, premiums are up 46% since 2021, about three times inflation.
  2. Restrict. Cover narrows, for example by excluding wildfire from buildings insurance. Because most policies renew every 12 months, the memo notes, insurers can make these changes with little friction.
  3. Withdraw. Where prices and claims cannot be balanced, insurers leave. A U.S. Senate Budget Committee investigation , using data from insurers covering about 65% of the market, found non-renewal rates were highest in the most climate-exposed counties, and rose 280% in Florida between 2018 and 2023. In California, State Farm stopped writing new home policies .

The memo stresses this reaches well beyond homes. Higher premiums for farming, shipping, food and tourism, it argues, will feed through into prices and add to the cost of living.

How Does This Affect Mortgages And The Economy?

A key component of the problem is the fact that lenders require buildings insurance. This creates a timing mismatch: a mortgage can run for 25 years or more, but the insurance behind it can be repriced, restricted or withdrawn every year. A home that was insurable when the loan was written can become uninsurable partway through, and the lender may not know. Canada’s financial regulator, OSFI, has already flagged this risk .

The chain the memo warns of runs like this: insurance becomes unaffordable or unavailable; homes become hard to sell or mortgage; prices fall; borrowers fall behind; lenders take losses. “When insurance becomes unavailable, it can be impossible to get a mortgage,” U.S. Senator Sheldon Whitehouse said when his Budget Committee published its findings.

The early links in that chain are already measurable. Research from the Federal Reserve Bank of Dallas, covering 6.7 million U.S. borrowers, found that higher premiums raise the probability of mortgage and credit-card delinquency . The average premium rise was linked to around 207,000 extra mortgages falling behind within a year.

The risk is also reaching investors. The memo urges pension funds with long-term obligations to interrogate their exposure to insurers, warning that the industry is “jeopardising longer-term shareholder value in favour of quarterly growth”. Allianz board member Günther Thallinger has made a similar point publicly, and has warned that the loss of insurability could undermine the entire economic system .

Is This Happening In The U.K.?

Not on the U.S. scale yet, largely thanks to Flood Re, a public-private scheme that keeps flood cover affordable for high-risk homes. But it has limits. It excludes homes built since 2009, and it is set in law to close in 2039, after which flood cover moves to fully risk-based pricing. Flood Re itself says the transition depends on cutting flood risk much faster than is happening today: “the U.K. must adapt and learn to live better with water,” said Flood Re’s director of corporate affairs, Kelly Ostler-Coyle.

Meanwhile, exposure is growing. One in four properties in England could be at flood risk by mid-century. Aviva analysed nearly 400,000 new homes and found 11% already sit in medium or high flood-risk areas . Aviva CEO Dame Amanda Blanc has said England is “for sure” building homes that could one day be uninsurable.

Are Insurers Fudging The Numbers?

This is the memo’s most serious allegation: that catastrophe modellers and actuaries in some firms have been asked to give future projections a “haircut” or massage figures so as not to cause alarm or hold up deals.

That claim cannot be independently verified, but there is circumstantial support. In the Bank of England’s climate stress test, insurers projected a 50–70% rise in annual losses under unchecked warming. The Bank thought the true figure could be up to four times higher , and found that firms with more sophisticated models reported much higher losses. The Institute and Faculty of Actuaries has gone further , arguing that widely used economic assessments are “rendering policymakers blind to the immense risk” by leaving out tipping points.

What Other Factors Are Driving This Risk?

Swiss Re finds that more, and more valuable, building in exposed places explains most of the long-run rise in losses, rather than climate alone. In 2025 a record 49% of global catastrophe losses were insured . The Bank of England judged insurers’ solvency manageable, and Florida’s crisis owed much to unusually high litigation costs.

U.S. industry bodies also dispute the climate framing: the National Association of Mutual Insurance Companies called the Treasury’s data effort “ failed and flawed ”, arguing that higher prices in risky areas simply match rate to risk. Meanwhile, the memo itself is anonymous and contains no figures.

Regulators are already moving, if slowly. The U.K.’s Prudential Regulation Authority set new expectations on climate governance, scenario analysis and data in December 2025. Canada’s OSFI says physical climate risk will become part of its regular reviews of insurers’ capital models, and Europe’s ECB and EIOPA have floated an EU-wide public-private reinsurance scheme.

The memo asks for more: that policymakers recognise a protection gap that insurers cannot and should not be expected to cover, and that investors look past quarterly results. Instead of attempting to make a moral point, its closing argument appeals to self-interest: without action, the authors warn, many of today’s policyholders “may suddenly find that they are not our customers tomorrow.”

While few people take joy in paying for insurance, a world without it would be far more expensive. In such a world there would be no mortgages, no new building, and every flood, fire or storm would become a personal financial disaster.

The bill for climate risk is coming either way; the only question remaining is who pays it.