FCA Climate Adaptation and Resilience: What Insurers and Mortgage Lenders Should Consider
The Financial Conduct Authority (FCA) has not introduced new climate rules for insurers or mortgage lenders. Its climate adaptation and resilience page, published on 4 August 2026, instead explains how physical climate risks such as flooding may affect access to property insurance and mortgages, and indicates that those risks may be relevant to obligations firms already have, such as delivering fair value and good customer outcomes under the Consumer Duty.
The page is aimed principally at insurers providing home and property cover and at mortgage lenders, with a shorter set of themes for all regulated firms. It sets no deadlines, but it shows what the FCA regards as relevant to product governance, customer communications and outcomes monitoring in these markets. For most firms in scope, the proportionate response is a targeted review of existing arrangements rather than a new climate framework.
What Has the FCA Published and Why Does It Matter?
The page sits within the FCA's climate change and sustainable finance section. It is an information page rather than a formal policy document: it carries no policy statement, consultation or guidance reference, does not amend the FCA Handbook and sets no implementation dates.
The FCA uses third-party data to show that the issue is already material. It cites Environment Agency estimates that 6.3 million properties in England are at risk of flooding, potentially rising to 8 million by 2050, and Climate Change Committee estimates that annual UK flood damage costs £3.3 billion, potentially rising to £4.5 billion by 2050. It also reports that 346,200 home insurance policies were placed into the Flood Re scheme in 2024/25, a 20% increase on the previous year.
Drawing on the International Sustainability Standards Board's IFRS S2 standard, the FCA separates acute physical risks, such as floods and storms, from chronic risks, such as rising sea levels and changing rainfall patterns. Its interest lies in consumers' ability to access and afford insurance and mortgages at fair value, markets' ability to price risk accurately, and competition where access to property insurance becomes uneven.
What Risks Has the FCA Identified?
The FCA has identified five key risks to consumers and markets from physical climate change.
Reduced access to insurance: cover may become harder or more expensive to obtain in higher-risk areas, and some consumers may be underinsured or not understand what their policy includes.
Less effective insurance markets: rising claims costs and uncertainty may make risk harder to price, affecting competition, capacity and product availability.
Harder access to mortgages: lenders may be less willing to lend in higher-risk areas, particularly where insurance is unavailable or unaffordable.
Higher costs and less choice for existing homeowners: borrowers may face higher costs or fewer options when remortgaging or moving home.
Mispricing of climate risk: gaps in data and modelling may mean risks are not fully reflected in asset prices, with the potential for abrupt adjustments.
These are market-level risks rather than findings about particular firms, but each describes a route by which physical climate risk could lead to poor customer outcomes, which makes them a useful starting point for firms' own risk assessments.
What Does the FCA Expect of Insurers and Mortgage Lenders?
The FCA's considerations are split between insurers, mortgage lenders and all firms, and their weight differs. Some are framed as expectations ("should"), some as points firms "may wish to consider", and some simply describe what the FCA has observed.
Commercial Freedom and Fair Value
The FCA is explicit that insurers make their own commercial decisions about which products to sell and which risks to accept, and that it cannot mandate that firms provide commercial services or serve particular groups of consumers. The page does not, therefore, require insurers to offer flood cover in high-risk areas.
Where insurers do offer products, the FCA says those products should represent fair value, and that climate-related risks may be a relevant consideration when assessing it. Insurers may also need to review products, pricing and communications as climate risks change. The page cites no Handbook provisions, so firms will need to consider these points within their existing product governance and Consumer Duty price and value arrangements. For the FCA's wider work on value, see our article on general insurance value measures.
Policy Wording, Exclusions and Claims Handling
The FCA says insurers should explain clearly what their policies cover and any exclusions, and should handle claims promptly, fairly and transparently. It has reviewed policy wording on flood and storm damage, and its 2025 review of home and travel claims handling highlighted clear policy information, consumer understanding of cover, and fair outcomes at the point of claim.
Given the underinsurance risk, the practical question is whether customers in exposed areas understand their flood and storm terms before they need to claim, not simply whether those terms are disclosed.
Non-Renewal and Helping Customers Find Alternative Cover
If an insurer decides not to renew a policy, the FCA says it should consider whether it can help the customer obtain alternative cover, for example through sufficient notice and support to avoid foreseeable harm. This is an expectation to consider assistance rather than a prescriptive requirement, and the FCA does not define sufficient notice. A firm withdrawing from higher-risk areas should nevertheless be able to explain how it set its approach to notice and signposting, and how that fits with its Consumer Duty obligations.
Mortgage Lending and the Flood Re Horizon
The FCA has carried out multi-firm work with lenders on how climate risk may affect lending decisions, and sought wider feedback through its 2025 Mortgage Rule Review Discussion Paper (DP25/2), summarising responses in Feedback Statement FS25/6.
The points drawn from that engagement are themes lenders "may wish to consider", not rules. Lenders are reflecting on how climate risks could affect lending decisions, property values and customer outcomes, and how changes in property insurance could affect future lending. The FCA specifically mentions Flood Re's scheduled expiry in 2039 and the increasing number of properties built since 1 January 2009 that do not qualify for the scheme. Some lenders are also exploring how to support household resilience, given limited take-up of flood resilience measures. The 2039 date matters now because many mortgages written today will still be running when the scheme is due to end.
Consumer Duty and Outcomes Monitoring
The clearest statement for lenders is that they should be mindful of their obligations to deliver good outcomes under the Consumer Duty, and that outcomes monitoring should be a key source of intelligence for identifying emerging issues. In practice, this means asking whether existing management information could reveal climate-related patterns in declined applications, remortgaging, arrears or complaints, analysed by location or property type where the data allows.
Themes for All Firms
The FCA identifies four themes that all firms may wish to consider.
Data: a 2025 study published through the Climate Financial Risk Forum (CFRF) found significant differences in physical risk estimates for the same properties across providers.
Risk transfer: catastrophe bond issuance is growing, moving risk from insurers to investors.
Opportunities: the Climate Change Committee found that property flood resilience measures can deliver benefits that outweigh their costs.
Benefits of adaptation: firms that adapt effectively may be better placed to manage risks, reduce costs and meet changing customer needs.
The Climate Financial Risk Forum, which the FCA co-convenes with the Prudential Regulation Authority (PRA), has published guidance on adaptation, risk management and property risk data, with further outputs due in early 2027. The FCA also invites bilateral and group engagement on emerging risks, and points to a Regulatory Sandbox Climate Scenarios Cohort that it says will launch later this year.
What Should Firms Do Now
The starting point is to confirm how far the page is relevant: an insurer with a large home insurance book, or a lender with significant exposure to higher flood risk areas, will have more to consider than a firm with little property-related business.
For firms in scope, these steps fit within existing governance and review cycles.
Assess exposure by identifying which products, customer groups and property locations carry meaningful physical climate risk.
Revisit fair value assessments to record whether climate-related risk affects cost and value, documenting the conclusion even where no change is needed.
Review flood and storm wording, exclusions and limits in policy documents and key communications, and test whether customers are likely to understand them.
Review non-renewal processes, including notice periods, letter content and signposting to alternative cover.
Check flood and storm claims handling against the points in the FCA's 2025 claims handling review.
For lenders, consider how insurance availability, Flood Re's 2039 expiry and post-2009 properties are reflected in lending policy and outcomes monitoring.
Add climate-relevant testing to the compliance monitoring plan, allocate ownership to a named senior manager and report conclusions to the board.
Firms should also record which climate data they rely on and why, given the variation between providers. A documented, reasoned approach is likely to be more useful than an extensive framework built on uncertain inputs.
Frequently Asked Questions About the FCA's Climate Adaptation Page
Has the FCA introduced new climate rules for insurers or mortgage lenders?
No. The FCA's climate adaptation and resilience page, published on 4 August 2026, does not create new rules, amend the FCA Handbook or set deadlines. It explains how physical climate risks such as flooding may affect property insurance and mortgage markets, and indicates that these risks may be relevant to existing obligations, including fair value and the Consumer Duty.
Which firms should read the FCA's climate adaptation and resilience page?
The page is aimed mainly at insurers providing home and property cover and at mortgage lenders. It also sets out themes for all regulated firms on climate risk data, risk transfer and adaptation. Firms with little exposure to property-related risk are likely to find its direct relevance limited.
Can the FCA require insurers to offer flood cover in high-risk areas?
No. The FCA states that insurers make their own commercial decisions about what they sell and which risks they accept, and that it cannot mandate that firms provide commercial services or serve particular groups of consumers. Where insurers do offer products, the FCA expects them to represent fair value and to explain cover and exclusions clearly.
Why does Flood Re's 2039 expiry matter to mortgage lenders?
Flood Re is scheduled to expire in 2039, and properties built since 1 January 2009 do not qualify for the scheme. The FCA notes that lenders are considering how changes in the availability and affordability of property insurance could affect future lending. This matters now because many mortgages written today will still be running in 2039.
What support does the FCA offer firms working on climate adaptation?
The FCA offers bilateral and group engagement, its Regulatory Sandbox (including a Climate Scenarios Cohort it says will launch later this year) and innovation services for authorised firms, firms seeking authorisation and technology providers. It also co-convenes the Climate Financial Risk Forum with the Prudential Regulation Authority, which has further outputs due in early 2027.
How Compliance Angle Can Help
Compliance Angle supports insurers, mortgage lenders and other regulated firms in reflecting expectations like these within their existing frameworks. Relevant support includes:
Consumer Duty support, including fair value assessments and outcomes monitoring that take account of climate-related risk.
Reviews of policy documents, customer communications and non-renewal processes, alongside policy and procedure development.
Compliance gap analyses and compliance monitoring plans that include targeted testing of flood and storm related outcomes.
Board and Senior Manager advisory support on the governance and oversight of climate-related conduct risk.
Our approach is practical and proportionate, tailored to each firm's business model, permissions, size and regulatory risk. If you would like to discuss how the FCA's climate adaptation and resilience page affects your firm, please contact us at info@complianceangle.co.uk.
Source: Financial Conduct Authority (FCA), "Climate adaptation and resilience", first published 4 August 2026.
