Huge subsidence claims and forecasts of a 102% to 103% combined ratio put the market under strain before autumn rain
The remnants of Hurricane Isaias are sending gales and heavy rain to north-west Scotland, but the bigger exposure for UK home insurers is the run of record claims behind it, with Deloitte and EY both forecasting an underwriting loss for the market in 2026.
The Met Office has issued a yellow wind warning for the Highlands and the Western Isles, valid from 10am to 7pm on Wednesday. Gusts of 50mph to 60mph are likely, with up to 70mph possible on exposed coasts and hills. The warning covers disruption to road, rail, air and ferry transport and possible short-term power cuts. Isaias, the first Atlantic hurricane of the 2026 season, made landfall in the southern United States last Friday. The centre of the low and its most significant impacts will stay hundreds of miles from UK shores, and most of England and Wales is expected to stay largely dry. The event is geographically contained, but the conditions it arrives into are not.
A record year behind the market
UK property insurers paid out a record £6.1 billion in claims in 2025, according to the Association of British Insurers (ABI), the highest annual total since the trade body began collecting data in 2017. Weather-related claims accounted for £1.2 billion of that, up 14% on 2024, itself the previous record year. Storm damage to homes rose 32% to £244 million, and the average storm payout climbed to £2,450, £750 higher than the year before.
Storm Éowyn, which struck in January 2025, generated £378 million in UK insured losses according to PERILS, and the Met Office described it as the UK’s most powerful windstorm in more than a decade. Weather-related claims reached a quarterly record of £226 million in the first quarter of 2025, the first time they had topped £200 million in a single quarter since ABI records began.
Pricing has moved the other way. The average combined buildings and contents premium fell to £375 in the first quarter of 2026, down 5% on a year earlier, according to the ABI’s Property Insurance Premium Tracker.
Forecasts point to a loss
Deloitte forecast in December that UK home insurers would swing from a profit in 2025, with a net combined ratio of 98%, to a loss in 2026, with the ratio reaching 102.1%. EY put the 2026 ratio at 103% in March, meaning insurers would pay out £1.03 in claims and expenses for every £1 earned in premiums. Deloitte expected premiums to fall about 7% in 2026 as competition intensified.
Subsidence is the live 2026 claim
Summer 2026 was the hottest on record in the UK, according to the Met Office, and the Environment Agency confirmed on July 29 that seven areas of England, covering 51.4% of the country, were in drought. The ABI’s second-quarter data show home insurers paid £72 million in subsidence claims in the quarter, with the average settled claim at a record £20,000. The first-quarter average was £17,820.
Hastings Direct reported its highest monthly subsidence volume on record in August, almost 140% above the same month last year. Aviva’s chief executive, Amanda Blanc, said the insurer was reviewing its subsidence reserves and revisiting its pricing models, and AXA UK said it expected 2026 to be a surge year, though it could not say whether it would be a record. Adam Holland, head of retail underwriting at AXA UK, said the Met Office’s confirmation of the hottest summer on record “puts the impact of climate change into sharp focus.”
Steven Coxon, head of subsidence at Claims Consortium Group, has identified three surge years since 2018, in 2018, 2022 and 2025, and noted that ground conditions at the start of 2026 had not recovered from the previous year. Actuarial firm Milliman found that 2025 soil moisture deficit data tracked conditions in line with the 2018 and 2022 surge years. Coxon has warned that repeated surge events may lead insurers to change their underwriting philosophy for properties in subsidence-risk areas.
A fourth surge in eight years would build on ground that is already depleted. Subsidence damage typically becomes visible through late summer and autumn, and when autumn rain arrives on drought-stressed ground, the resulting soil movement can generate structural claims that take months to work through.
What it does to renewals
Sums insured are part of the same picture. The Building Cost Information Service (BCIS) has warned that rebuild costs are outpacing sums insured, with drought making the underinsurance gap wider, and that brokers have a narrowing window to request updated rebuild-cost data before the next renewal.
Mid-year reserve reviews at Aviva, an expected surge year at AXA and combined ratio forecasts above 100% all point to repricing pressure for a market whose average premium is falling, with the claims environment yet to be reflected in prices.