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• The insurance industry continues to be hard hit by the escalating frequency and severity of global climate events. 
• Proactive risk management will help businesses minimise the impact of extreme climate related events. With government plans to accelerate grid connections and develop robust energy infrastructure, businesses should consider aligning their risk strategies with these initiatives. 
• The continued freeze on fuel duty, which has contributed to higher CO2 emissions (Source: CarbonBrief), highlights the importance for insurers to be aware of environmental impacts when assessing risks

Brexit challenges, labour shortages, nature loss and extreme weather events means the UK’s food self-sufficiency is at a critical low.  

Only one in 10 food industry leaders are optimistic that UK food security will improve by the end of 2025. (Source: City Harvest) 

60% of farmers believe food shortages could cause civil unrest in the next 10 years. (Source: City University of London) 

Long term risk from climate change will pose significant challenges to some domestic food production in 2025 and beyond.

• When food shortages occur, risks relating to terrorism and political violence, political risk, business interruption, marine and aviation, agriculture, product liability and recall, and environmental liability increase, and these will impact insurance premiums.
• The rising cost of food and supplies may result in people being less able to afford insurance premiums.

The market for metals and critical minerals has doubled in size over the past five years because they are crucial for the green transition. It is expected to double again by 2040 to reach a value of more than USD64bn. (Source: Allianz) 

Higher energy prices mean the costs of materials will increase. 

The move towards sustainability will drive demand for recyclable materials and renewable products. This could eventually bring the costs of materials down.

• As the cost of some materials falls, insurers may reduce customers’ insurance premiums.

Over the next five years, building costs are expected to increase by 15%, and tender prices by 20%. (Source: Construction Management) 

By 2025, construction companies will need to adhere to stricter environmental regulations. This may increase costs initially but could offer long-term savings through energy efficiency. (Source: Industrial News) 

When project planning, energy efficient designs, green building practices, and the use of sustainable materials will become more and more important. 

The UK government has allocated £5 billion for housing investment in 2025-2026, plus £3 billion for SMEs and the build-to-rent sector via housing guarantee schemes to offer lower-cost loans. (Source: Construction News) 

To enhance fire safety, the government has pledged over £1 billion for cladding remediation by 2025-2026, though concerns about the pace of progress persist. (Source: Construction News) 

The construction sector is facing a significant skills shortage, with an estimated need for an additional 152,000 workers to meet government housing targets. (Source: Construction News)

• As insurance costs rise, insurers may increase customers' insurance premiums.
  
• Construction firms will need to update their insurance if materials, timescales or project scopes change, ensuring they are adequately covered for any potential disruptions.
• The increased focus on fire safety and cladding remediation underscores the importance of having comprehensive coverage for construction defects and liabilities, particularly as regulatory scrutiny intensifies.

New EU CO2 emission standards will be coming into effect next year and there will be a pressing need for more electric vehicles in Europe. (Source: Allianz) 

The owners of electric cars are currently exempt from Vehicle Excise Duty (VED), but this exemption will end in April 2025, leading to higher car taxes for many drivers. (Source: Financial Times) 

By October 2024, there were over 1.25 million fully electric cars in the UK, accounting for 3.75% of all cars on the road. (Source: Zapmap) 

The luxury car market is projected to grow from $738.63 billion in 2024 to $967.65 billion by 2029 driven by demand for better features, comfort and electric options. (Source: Nexus) 

Fuel duty will remain frozen, which the chancellor described as essential for supporting working people amid global uncertainties. However, vehicle excise duty for petrol and hybrid cars will rise, potentially adding £11.2 billion to Treasury receipts by 2029-30. (Source: Financial Times)

• Car insurance premiums have risen by an average of 21% since June 2022. (Source: Gov.uk)
• The typical cost of car insurance cover is now £622. (Source: Forbes)
• The cost of paying for car insurance in instalments can add up to 30% to the total cost of a policy and paying in this way has caused 79% of adults to experience financial difficulty. The Financial Conduct Authority (FCA) is investigating. (Source: Forbes)
• The rise in vehicle excise duty for petrol and hybrid cars may accelerate the shift to electric vehicles, prompting insurers to adapt their offerings for different risk profiles and coverage needs. This shift could also reduce the number of policies for traditional vehicles.

On average, 21 people are competing for every rental property. This is more than double pre-pandemic levels. (Source: Landlord Today) 

Despite the increase to rental costs, renting is still more accessible than buying a home. 

In 2025, all leased commercial properties will need a valid EPC. If the existing lease has an expired EPC, the property owner(s) will need to apply for a new one. 

From 2025 onwards, properties to be newly let must achieve an EPC rating of C or higher.  

Applications to convert commercial properties into residential units have surged, driven by high housing demand. This trend presents opportunities for landlords but requires navigating complex regulations and potential costs. (Source: This is Money)

• Allianz Economic Research – Allianz global research analysing economic and industrial developments.
• Underinsurance – Resources, information and guidance to help customers understand the issue of underinsurance.
• Ludonomics – Ludovic Subran, Allianz Group’s Chief Economist, publishes a weekly update on Allianz markets, macro, sector and insurance.