Crypto News: Britain's evaporating flood insurance

This week marks the one-year anniversary of a grim weather event for many Britons. Last October Storm Babet brought the third wettest three-day period in a series for England and Wales since 1891, flooding thousands of homes.

Today's story looks at how a first-of-its-kind insurance program bought time to shore up the UK's flood defenses. Yet exclusive data shows that isn't happening quickly enough.

Click these links to read more "Uncovered" stories. Part 1 looked at the fragility of US "last resort" insurance programs. Part 2 explored the risky business of private climate modeling. Part 3 revealed the harsh reality of the catastrophe bond market. For more on how global warming is impacting insurance markets, please subscribe.

By Jess Shankleman and Olivia Rudgard

Winter is the wettest time of the year for the UK and Britons have already had enough of rain this autumn. Some areas of the country saw record rainfall for September, leading many to fear they will experience similar widespread flooding to last year.

For previous flood victims, a touch of heavy rain can cause high anxiety as they anticipate their lives will be upended once again, having to leave their homes for months and losing their most treasured possessions.

While insurance doesn't solve everything, it can help. Countries around the world are grappling with how to pay for the havoc wreaked by climate change, and the UK appears to have come up with a neat fix, at least for now.

A program known as Flood Re allows insurers to completely ignore flood risk on homes, meaning most people can continue to get cover even if they're inundated every year.

Flood Re has been a huge success, to the point that other countries are looking at replicating it. It operates in the background, so many people don't even know they benefit from it.

The problem is that Flood Re is set to eventually end, while climate change is getting worse, and the UK's Environment Agency is facing an uphill battle to install new flood defenses and maintain existing ones.

Flooded fields near Godney in Somerset. Photographer: Tom Jamieson

Bloomberg Green obtained exclusive data which shows the EA only has a high degree of confidence that 15% of flood-defense projects funded through its main investment program will be completed by their deadlines.

That means many people could find themselves with uninsurable and unsellable homes, when Flood Re expires and the UK returns to a risk-reflective insurance market in 2040.

Flood victims we spoke to remain traumatized after their homes and possessions were ruined by foul smelling water that bubbles up from rivers or drains.

James, who lives on the Welsh border, and has been flooded out of his home twice since moving in two years ago, says he simply wouldn't have gone ahead with the purchase if he knew he didn't have access to Flood Re.

So what's the solution? Flood Re wants to introduce special certificates that would be attached to each property, letting potential buyers know exactly the level of risk they face and how to mitigate it. Another option is to just let some parts of the country "revert to nature," says Mike Stanton, chair of the Somerset Rivers Authority.

That would mean telling residents of high flood-risk zones that they must move – a hard sell for the thousands of people living in Britain's vulnerable coastlines and river floodplains.

All of this will come to a head when Flood Re ends in 15 years. Unless the government can protect enough properties to soften the blow, a crisis looms for Britain's homeowners.

Read the full story on how the UK is losing the race against devastating floods on Bloomberg.com.

288,567

This is how many homes entered the Flood Re insurance program last year. As floods get worse and payouts increase, it will become more expensive to keep Flood Re going.

"There's a moral hazard with Flood Re in place."

Kemi Bello

An actuary for insurer Sompo International

Homeowners don't feel the need to take action — or push their officials to do so — as long as they can get affordable insurance, according to Bello.

Anderson Tanoto, the scion of an Indonesian billionaire whose vast empire supplies companies from Procter & Gamble Co. to Unilever Plc, has been on a green blitz of late.

He spoke about sustainability at Davos this year, after previously addressing the flagship United Nations' climate-change conference in Glasgow. He's helped his family's timber and palm oil conglomerate forge relationships with global banks to become one of Asia's biggest borrowers in the green loans market.

Yet the Tanoto family's companies are now under a new spotlight as they are facing and denying claims that they own or exert control over firms connected to deforestation. The situation highlights some of the challenging environmental concerns investors and lenders must consider when backing large empires with massive global footprints.

Read the full story with in-depth reporting and interviews, conducted by the Gecko Project newsroom for stories published in collaboration with Bloomberg News.

A BHL company plantation in the district of Kapuas in Central Kalimantan, Indonesia, in 2021.

Banks are backing clients that threaten rainforests. The finance industry is continuing to channel tens of billions of dollars into companies whose operations are a direct risk to the future of tropical rainforests including the Amazon, according to a new study.

Morocco sets new green goal for World Cup. The country, buoyed by recent foreign recognition of its rule over Western Sahara, plans to double green electricity production in the disputed territory to meet growing demand before it co-hosts the 2030 FIFA World Cup.

Who will lead the future world economy? The CEO of a company aiming to climate-proof food and water supply chains and the co-founder of a platform to reforest the planet were among the 16 entrepreneurs chosen for the Bloomberg New Economy's Catalyst list.

By Mark Chediak and Brian K. Sullivan

California utilities said they may need to cut power to homes and businesses from San Francisco to Los Angeles starting later this week when gusty winds are expected to sweep across the Golden State.

PG&E Corp. said the possible intentional blackouts could begin as early as Thursday, when strong dry offshore winds are expected. The shutoffs could hit as many as 30 counties from the San Francisco Bay Area to Santa Barbara, according to a post on PG&E's website.

PG&E said Tuesday its meteorologists are tracking a weather system that may bring winds of up to 70 miles per hour (113 kilometers per hour) across sections of its service territory. Dry winds raise the risk of wildfires raging out of control.

The possible power cuts could begin as soon as Thursday for counties located near the San Francisco Bay Area. Photographer: David Paul Morris/Bloomberg

For months, scientists have been warning California has a higher risk of wildfires because of the growth and relatively mild fire seasons in the past few years. Two winters of plentiful water have allowed plants to grow for the last couple of summers, leaving many hillsides covered with vegetation that has now died and dried out.

"It is that time of year,'" said Brian Hurley, a senior branch forecaster at the Weather Prediction Center. "These last two winters have been pretty good so there is a lot more vegetation out there that has not been burned compared to 2021, 2022 or 2023. They are crossing their fingers out there."

California has already had its fourth largest fire in history this summer and is currently just under the five-year average in terms of total acreage burned.

Catastrophe bonds are a specialized insurance tool that can help people who've lost their homes find money to rebuild – or deliver big profits to investors who are willing to gamble on big climate-linked disasters. Bloomberg's Gautam Naik tells Akshat Rathi about how these instruments differ from ordinary insurance, and why they have become an appealing proposition for climate vulnerable nations. Listen now, and subscribe on Apple, Spotify, or YouTube to get new episodes of Zero every Thursday.

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