Insurers Shrink From Covering Damage Due To Subsidence & Sinking Buildings

Subsidence. That’s a term many readers may not be familiar with, but according to Bloomberg, it is a slow moving climate disaster that has already caused tens of billions in damage and has the potential to affect 1.2 billion people and lead to a loss of $8 trillion in economic output. That’s a lot of money for something that most of us have never given a second thought.

According to insurance specialist Admiral, subsidence is when the ground below a building sinks, putting the structure as serious risk of damage. It can warp or crack foundations, which causes floors and walls to move, leading to structural imbalances. Subsidence should not be confused with heaves that occur when the ground under a structure shifts upward, or the landslip that happens when the ground moves down a slope or is washed away. Subsidence is not the same as the settlement that occurs when the weight of a building compresses the land below.

Subsidence  can happen when the ground below a structure shrinks or swells due to the weather. This typically happens with structures built on clay, which is more likely to either shrink or swell when there are changes in moisture. More often today, those changes are associated with extreme weather as the result of changes in climate which cause the soil to swell with heavier than normal rain and then dry excessively  when hotter than normal temperatures occur. When those things happen, foundations can move and crack.

Subsidence Is A Problem In Europe

Because of its soil and its status as the world’s fastest-warming continent, Europe is particularly exposed, Bloomberg reports. The European Central Bank has estimated Europe’s potential damage from sinking land at more than €2.5 trillion ($2.9 billion) across all euro-area financial institutions. Although most of that is classified as “low risk,” this summer is forecast to be one of the hottest and driest on the continent, creating perfect conditions for subsidence damage.

In France, insurance industry trade group France Assureurs has estimated that repairs to structures could cost insurers as much as €43 billion by 2050. Now, we do not wish to be unkind to insurance companies. Their business is what feeds their families and sends their children to college, but there is an old joke that says the business model for the insurance industry is to sell coverage and deny liability.

Then we have companies like State Farm that spend millions on cutesy ads, then refuses to provide insurance to large segments of America because of the risk of forest fires which is accelerated by a warmer planet. What is especially galling is that many of these companies that are wringing their hands about climate change are subsidizing the extraction industries that are making climate change worse.

The town of Presles-en-Brie outside of Paris has joined 14 nearby villages in a suit that seeks to have subsidence recognized as a natural catastrophe like flash floods and wildfires. That would allow those communities to be compensated for their losses from subsidence, losses that were disallowed following a major drought in 2022 damaged a number of structures throughout France.

“It’s David against Goliath,” Dominique Rodriguez, the mayor of Presles-en-Brie for more than three decades, told Bloomberg. Many parts of Europe are built on soil that is rich in clay. The problem is made worse by how densely populated much of Europe is,

To address the increase in subsidence claims, in 1989 France began CatNat, a public-private insurance program that puts the state and the industry on the same side as costs surge. Homeowners are compensated for damage after their municipality has been awarded a CatNat certification. Otherwise, insurers are free to reject claims. In the absence of programs like CatNat, homeowners have little or no recourse via insurance coverage if their buildings suffer damage as a result of subsidence.

“The trend is getting more complicated with climate change,” said Pierre Vaysse, chief underwriting officer for property and casualty at the French insurer. “The forecast is that claims will at least increase by 50% and probably double by 2050.” The CatNat system lost €49 million in 2024, its eighth straight annual deficit. Known as the Central Reinsurance Fund, the program is paid for by a national surcharge on insurance policies, which was raised by eight percentage points in January to account for climate change.

No Country Is Exempt

The problem is not confined to Europe. Bloomberg says Jakarta has sunk more than 2.5 meters (8 feet) in just the past decade. In Tehran, subsidence is as high as 22 cm (8.7 in) a year. 40% of Houston, Texas, subsides more than half a centimeter a year. In the Netherlands, nearly a half million homes will be affected by subsidence in the next ten years. Once that became widely known, the average price of homes plummeted. Typical repair costs are in the range of €100,000 per home and are seldom covered by insurance.

In London, subsidence is projected to effect more than 1 million homes in the next few years. Insurance claims for damages from subsidence rose nearly 80% between 2019 and 2023, with the average payout 40% higher toward the end of that 5-year period, according to data provided by the Association of British Insurers. It is also an issue along the East Coast of the US where underground aquifers have been depleted.

Whether damage to structures from subsidence is covered by insurance will vary from country to country and from insurer to insurer. Homeowners will need to read their policies carefully, especially the section called Exclusions. There may be high deductibles that must be paid first by the homeowner before any benefits are paid. And as we have learned, if the problem gets significantly worse, insurers will simply decline to offer coverage in areas where subsidence claims are prevalent.

Fixing the damage can be expensive. Common treatments include adding micropiles to support the foundation or injecting substances into the soil to stabilize it. Neither method is inexpensive. In some cases, the cost may exceed the value of the building, leaving homeowners with nowhere to live and no money to purchase another home. Subsidence is a serious problem that is likely to get worse as soils are first inundated with rain then baked by extreme heat.

Add subsidence to the list of harms from climate change that world governments are doing far too little about. By mid-century, it will likely be too late to remedy the subsidence phenomenon, thanks to the Drill, Baby, Drill crowd that refuses to take climate change seriously or do anything remotely rational about it.