Earth is reflecting less sunlight back into space than it used to – and the rate at which the planet is absorbing extra energy has more than doubled since 2000. For insurers, that is not just an abstract climate-science curiosity. It is a data point that goes to the heart of how catastrophe models, pricing and long-term underwriting assumptions are built.
Catastrophe models are only as good as the physical assumptions baked into them. One of those assumptions is that the planet's overall energy budget – how much solar energy it absorbs versus how much heat it sheds back to space – behaves roughly in line with what climate models expect. That assumption is now under strain.
NASA's Clouds and the Earth's Radiant Energy System (CERES) satellites have been measuring that budget since the late 1990s, tracking Earth's albedo (the share of sunlight reflected away) alongside outgoing heat radiation. The difference between the two – Earth's energy imbalance, or EEI – is what actually drives long-run warming, and NASA and NOAA scientists have confirmed it roughly doubled between 2005 and 2019, with the upward trend continuing since (NASA/NOAA, CERES; NASA Langley).
That matters to underwriters for one specific reason: the observed doubling is arriving faster than most climate models can reproduce, and the discrepancy isn't a rounding error. ETH Zurich's Reto Knutti has estimated that, extrapolated forward, the rate of increase in the EEI implies near-term warming could end up 10% to 30% higher than what current consensus projections build in. Kyle Armour of the University of Washington has gone further, suggesting the models "appear to be missing some processes" entirely. For an industry whose flood, storm and subsidence pricing depends on multi-decade model outputs, a persistent and growing gap between observation and model is exactly the kind of basis risk actuaries lose sleep over. Bjorn Stevens, who leads the Max Planck Institute for Meteorology, has called the shift in how scientists now read two decades of satellite and ocean-float data "a game changer."
This isn't a new worry for the industry so much as a sharper version of one. Rowan Douglas and colleagues at the WTW Research Network have previously warned Insurance Business UK that the climate scenarios insurers rely on may already be inadequate because they don't capture non-linear tipping points, such as an ice-sheet collapse with knock-on effects for coastal and property risk (see: Are the climate change scenarios currently used by insurers still fit for purpose?). A widening gap between observed and modelled energy uptake is effectively evidence for that same critique: it suggests the models are missing not just isolated thresholds, but a more basic driver of how fast the whole system is heating up.
What this means for portfolios exposed to UK risk specifically
Two tipping points stand out for anyone pricing UK exposure. The first is permafrost thaw, which USS Investment Management – which runs the pension scheme for UK university staff – flags as plausible within 15 to 20 years. The second, more locally consequential one, is a possible breakdown of the Atlantic Meridional Overturning Circulation (AMOC), the ocean current system that keeps northwestern Europe's winters mild. Some recent modelling cited in Bloomberg's reporting points to scenarios where an AMOC collapse could send UK winter temperatures as low as -20°C and push Arctic sea ice as far south as East Anglia, even as summers keep getting hotter and drier elsewhere in the system – a combination that would hit agriculture, subsidence and heating-related claims simultaneously rather than in the gradual, seasonal way current models assume.
Institutional investors are already trying to price this in. Sarah Kapnick, JPMorgan's global head of climate advisory and a former NOAA chief scientist, has said funds are asking what "climate black swan risks" mean for portfolios on realistic decision horizons, cautioning that "systems can be pushed toward thresholds faster than society and markets can adapt." Standard Life plans to run tipping-point simulations across its £317 billion portfolio next year, and Legal & General's climate modelling team has said some investors are now bracing for a worst-case outcome as confidence in a fast energy transition erodes. USS, for its part, works to a five-to-ten-year scenario horizon specifically so it stays alert to tipping-point risk before, rather than after, thresholds are crossed.
UK regulators are moving in the same direction. The Prudential Regulation Authority's updated supervisory statement, SS5/25, which took effect in December 2025, requires banks and insurers to strengthen governance, scenario analysis and data management around climate risk, and explicitly acknowledges that risks can be non-linear and irreversible (Bank of England, SS5/25). That follows the Climate Change Committee's warning that the UK's insurance protection gap could widen without faster adaptation, with annual flood damage projected to rise from £3.3 billion currently to £4.5 billion by 2050 under a 2°C scenario (see: UK insurers face mounting climate exposure, CCC report says).
Insurers and brokers are already responding by extending the time horizons and granularity of their catastrophe modelling – as with new flood datasets built on IPCC scenarios stretching to 2100 (see: UK insurers confront century-long flood risk as climate reshapes underwriting) and climate-conditioned catastrophe tools from carriers such as Munich Re and AXA XL (see: Future-proof: How climate modelling tools are empowering insurers and brokers). But if the underlying physical trend – Earth absorbing energy faster than models predict – keeps outrunning those tools, insurers may find themselves repricing risk on a much shorter timetable than their models currently assume.
Repricing before the "reveal"
Tim Lenton, the University of Exeter climate scientist known for his work on tipping points, has argued that when an underlying shift looks irreversible, markets should reprice ahead of the damage actually materialising rather than waiting for it to show up in claims data. That is the crux of the challenge now facing UK insurers: models built on a more stable, better-understood climate system are being tested by a planet that is absorbing energy at a rate few of them anticipated. As Aniket Shah of Jefferies has put it, economies have historically adapted quickly to shocks like wars and pandemics – but tipping-point risk is different, because it may not be reversible once triggered.
For now, insurers appear to be treating this less as a single event to model and more as a background risk multiplier – one that, as brokers have told Insurance Business UK, "amplifies all other risks" across property, casualty and life books alike (see: Climate slips down the agenda, but insurers warn it's the "risk that amplifies all others"). Whether that response is fast enough may depend on how quickly the industry's models catch up with what satellites are already showing: a planet that is measurably, and increasingly, less shiny than it used to be.
