Insurance is a promise. You pay in every month. In return, the insurer promises that if the bad thing happens — the flood, the fire, the collapse — they pay out.
That is the entire product. There is no other product. That is it.
What the industry actually does with your money
Between the moment you pay your premium and the moment you make a claim, the insurer invests your money. Primarily in bonds. Primarily in sovereign debt — government borrowing.
Lloyd's of London holds 82% of its investment portfolio in cash and government bonds. (KBRA Lloyd's ratings report, June 2025)
The global insurance industry manages approximately $42 trillion in assets. Fixed income — bonds, sovereign debt, mortgages — is the dominant asset class. (IAIS Global Insurance Market Report 2025)
Allianz is the largest insurance company in the world. Between late 2024 and early 2026, its investment arm — operating primarily through PIMCO, the world's largest active bond manager with $2.27 trillion under management — accumulated $2.67 billion in Israeli government bonds. At its peak in September 2025, the Allianz group held 51.8% of all non-Israeli institutional holdings in Israeli government debt. More than every other country's institutions combined. (Middle East Eye / Profundo, June 2026)
Israel issued $19.4 billion in sovereign bonds between October 2023 and January 2025. Goldman Sachs, Barclays, JPMorgan, Citi, Deutsche Bank, Bank of America, and BNP Paribas underwrote it. (BankTrack / Profundo / PAX, February 2025)
Your insurance premium went into that pool.
What the industry does when you need the promise kept
In late 2024, Allianz cancelled home insurance policies in parts of Los Angeles it had assessed as high wildfire risk. Many of those homeowners were uninsured when the fires came months later. (Minter Ellison, June 2026)
State Farm, Allstate, and Farmers had already withdrawn from the California market entirely before the fires. The burden shifted to the California FAIR Plan — the state insurer of last resort — which was undercapitalised by the time it needed to pay out. (Nature, April 2025)
In New Zealand, AA Insurance suspended new policies in Westport in 2025 because of flood risk. It described this as temporary. It was the first public announcement of its kind in New Zealand. Industry analysts described it as the start of a pattern. (Minter Ellison, June 2026)
Globally, insured losses from weather events in 2025 were $145 billion. Uninsured losses were more than double that. Weather events accounted for 92% of all disaster losses. (Munich Re, January 2026)
The Flood Re contract
Flood Re was established by the Water Act 2014. It is a joint initiative between the UK government and the UK insurance industry. It ends in 2039. Its own documentation states that for homes at the very greatest flood risk, flood insurance will always be unaffordable without subsidy. (Flood Re ClimateWise Report, 2023)
Loughborough University, in a February 2026 analysis, described the scheme's logic plainly: the government reduces risk through flood defences, homeowners adapt, and insurers raise prices gradually. The assumption baked in is that flood risk will fall by 2039 and the market can normalise. (Loughborough University, February 2026)
The government's own flood defence programme is 40% behind schedule. The target was to protect 336,000 properties by 2027. The projected delivery is 200,000. (Bank of England / PwC via prior research)
The flood risk will not fall by 2039. The scheme will end. The market will price. Homes in the highest-risk postcodes will become uninsurable or unaffordable to insure.
What this looks like in one sequence
You pay home insurance premiums. Insurance Groups invests your premiums, without your informed consent, for example Allianz invests through PIMCO into Israeli government war bonds at 5.56% yield. Simultaneously, Allianz cancels your home insurance because the flood model says your postcode is too risky. When 2039 arrives and the subsidy ends, your mortgage lender — whose risk models are already pricing flood exposure — starts declining to refinance properties in your postcode. Your house, which you have been paying to insure and paying a mortgage on for twenty years, becomes an asset the market will no longer price, you can’t sell it or get help to fix it right at the moment they promises to be there, all those years that they collected your money and sponsored sports teams for brand comfort.
They will leave you to drown.
The money you paid to be protected from this outcome was in an Israeli government bond the whole time. Making the collapse come quicker and more brutally .
Your insurer collected the premium. Invested it for yield. Withdrew from the market before the claim arrived. And had its government counterpart write sunset clauses into the local legislation that made the withdrawal legal and blocks you from suing.
This is not a market failure. It is the market working exactly as designed — for the people who designed it.
The ones with the big ships and the weird wigs and muskets full of human feces
(Profundo via Middle East Eye, June 2026) (BankTrack, February 2025) (Flood Re / Water Act 2014) (Munich Re, January 2026) (Nature, April 2025)
Sources
[1] Impacts of Climate Change and Remote Natural Catastrophes on EU Flood Insurance Markets: An Analysis of Soft and Hard Reinsurance Markets for Flood Coverage https://res.mdpi.com/d_attachment/atmosphere/atmosphere-11-00146/article_deploy/atmosphere-11-00146-v3.pdf
[2] Regional Inequalities in Flood Insurance Affordability and Uptake under Climate Change https://www.mdpi.com/2071-1050/12/20/8734/pdf
[3] Insurance and climate risks: Policy lessons from three bounding scenarios https://pmc.ncbi.nlm.nih.gov/articles/PMC11621748/
[4] The allusive market: insurance of flood risk in neoliberal Britain https://www.tandfonline.com/doi/pdf/10.1080/03085147.2018.1547494?needAccess=true
[5] Insurers dial back flood risk exposure: Where will this lead? https://www.minterellison.co.nz/insights/insurers-dial-back-flood-risk-exposure-where-will
[6] How the UK is keeping flood insurance affordable – until 2039 https://www.lboro.ac.uk/media-centre/press-releases/2026/february/keeping-flood-insurance-affordable/
[7] Climate Change Upends the Logic of Insurance https://ip-quarterly.com/en/climate-change-upends-logic-insurance
[8] What happens after Flood Re? - CII https://www.cii.co.uk/learning/learning-content-hub/articles/what-happens-after-flood-re/8f85e9e4-9560-415a-bc67-6ce1f057484f
[9] The growing void in the U.S. homeowners insurance market - Nature https://www.nature.com/articles/s44168-025-00231-8
[10] Flood Re | LinkedIn https://uk.linkedin.com/company/flood-re-limited
[11] [PDF] Global Insurance Market Report (GIMAR) https://www.iais.org/uploads/2025/11/GIMAR-2025-special-topic-edition-on-NatCat-insurance-protection-gaps.pdf
[12] [PDF] 2023 ClimateWise Report - Flood Re https://www.floodre.co.uk/wp-content/uploads/Flood-Re-ClimateWise-response-2023-web-version.pdf
[13] [PDF] Closing the gap, not the market - Insurance Europe https://www.insuranceeurope.eu/mediaitem/b4c9d7c7-c8fd-40f9-8c34-814c728d8b6e/Closing+the+gap+-+not+the+market.pdf
[14] [PDF] Flood Re Limited - GOV.UKhttps://assets.publishing.service.gov.uk/media/685e77d162b2e559cbd7534c/flood-re-ara-2024-25.pdf
[15] Climate change presses on: Devastating wildfires and ... - Munich Re https://www.munichre.com/en/company/media-relations/media-information-and-corporate-news/media-information/2026/natural-disaster-figures-2025.html
[16] [PDF] How the UK can end reliance on Flood Re by 2039? https://www.actuaries.org.uk/system/files/field/document/C1 How the UK can end reliance on Flood Re.pdf
[17] [PDF] Financial Protection Against Catastrophic Risks | OECD https://www.oecd.org/content/dam/oecd/en/publications/reports/2026/03/financial-protection-against-catastrophic-risks_9aa93a38/32a3acd7-en.pdf
[18] [PDF] Scenario analysis for underwriting in a changing climate https://www.cisl.cam.ac.uk/files/climatewise_scenario_analysis_task_group_white_paper.pdf
[19] Climate change: how fires and floods are creating uninsurable areas ... https://theconversation.com/climate-change-how-fires-and-floods-are-creating-uninsurable-areas-across-europe-283181
This made my husband and I seriously debate paying the $4000 this year for home insurance. Most of that is for earthquake cover, but lets be real - the earthquake that we'll need to claim after will bankrupt the insurance company. So, what good are they? Better to put that $4000 into an account and draw from it ourselves when needed. Or more co-op insurance, neighbours getting together putting in money collectively. Sharing resources and skills if homes need work etc??
It's time for a bigger tea party than we've had yet.