What does this mean for property security?
Subsidence is no longer a peripheral concern for lenders assessing converted stock. UK property claims hit a record £6.1 billion in 2025, with domestic subsidence payouts reaching an all-time high of £307 million, according to the Association of British Insurers (ABI). Deloitte has forecast home insurers will swing to a net loss in 2026, with a combined ratio of 102.1%.
Megan Dunford, head of large and complex property claims at Zurich UK, said sustained temperature variation places material stress on building fabric.
“This increases the risk of thermal expansion and contraction, which may contribute to cracking, subsidence, and ultimately escape of water incidents,” Dunford said. “Over time, this not only undermines building safety and durability, but also exposes residents to higher maintenance costs and reduced living standards.”
For mortgage brokers and lenders, that trajectory carries direct implications. Properties with elevated subsidence exposure or deteriorating building fabric present valuation risk that may not be immediately visible at the point of application, particularly where buildings predate modern inspection standards or have not been assessed under residential criteria. Brokers handling remortgage and purchase cases on converted commercial properties should factor this into their due diligence conversations with clients.
What are regulators doing to close the gap?
The Prudential Regulation Authority (PRA) launched its General Insurance Stress Test in May to probe how firms are managing climate-driven property exposure. The move reflects growing regulatory concern that the insurance market – and by extension, the secured lending market – has not fully priced the risk embedded in older and converted stock.