As global temperatures continue to rise, underground climate change is becoming an increasingly significant concern for commercial property owners. This emerging risk, driven by heat generated from basements, tunnels, sewers, and other underground systems, is causing noticeable temperature increases beneath major cities.
Some cities, such as Chicago, are experiencing underground temperature rises of up to 27°F in specific locations.1 This shift is leading to soil movement, which can result in the settling, contracting, and expanding of the ground, thereby threatening the structural integrity of building foundations.
Analysis from PwC shows that subsidence-related insurance will have a significant impact if sustained heat continues. The expected cost of subsidence for insurers could increase to GBP1.9 billion by 2030.2
The urban heat challenge
While some cities are built to withstand high temperatures, others, such as London and New York, can become unbearable during heat waves. These cities are particularly vulnerable to the effects of underground climate change. The heat trapped and generated in underground spaces exacerbates ground temperature increases, which impacts commercial buildings' stability and safety.
Reviewing commercial property policies
Given the potential risks, commercial property owners must review their insurance policies to determine whether they are adequately covered for losses stemming from underground climate change. All-risk property policies are generally the most comprehensive, covering all risks of physical loss and damage unless specifically excluded. However, a thorough review of policy language is essential to ensure comprehensive coverage.
Exclusions related to earth movement can significantly limit the scope of coverage. These exclusions are often broadly written but need to be clear and unambiguous to be enforceable. Therefore, property owners should carefully scrutinise their policies and talk to their broker to understand the nuances of their coverage and identify any potential gaps.
Proactive measures and future considerations
Commercial property owners should take proactive steps to protect their investments in light of the emerging risks associated with underground climate change. This includes consulting with structural engineers to assess foundation conditions, monitor for cracks, and recommend appropriate remediation measures. Prompt notification of any damage to insurers and carefully presenting claims to avoid attribution to potentially uncovered causes is crucial.
Beyond immediate mitigation measures, it is essential to consider the broader implications of underground climate change. Will this emerging risk necessitate the use of different building materials? Could new building regulations be required to address the challenges posed by rising ground temperatures? The industry must begin exploring these critical questions to ensure long-term resilience and safety.
How can Gallagher help?
Rising ground temperatures could threaten the stability of building foundations, making it crucial to review insurance policies, take proactive mitigation measures, and consider the broader implications for building materials and regulations in impacted regions.
At Gallagher, we support commercial property owners in navigating these emerging risks. We work with our clients to review their commercial property policies to ensure they are adequately covered. By providing expert advice on policy language, exclusions, and endorsements, we aim to help property owners fully understand their coverage and identify potential vulnerabilities.
In addition to policy review, we advise on risk mitigation measures, working closely with structural engineers and other experts to assess foundation conditions and recommend necessary remediation steps. Our goal is to ensure that our clients are well-prepared to face the challenges posed by underground climate change and can protect their assets effectively.
