Tens of thousands of Kiwi homes could become uninsurable within 15 years as climate change drives up insurance costs and risks, new research suggests.
A report released today by the Helen Clark Foundation and consulting firm WSP warns that without government intervention, insurance could also become unaffordable for many households, particularly those in flood-prone areas.
Lead author Kali Mercier said insurance premiums are increasing due to climate factors, with flood-prone areas facing particular pressure.
“I think we need to be thinking about how much is too much within a household, and whether we should then subsidise some people to help them keep insurance.”
According to the researchers, premiums are expected to rise further over time as more insurers move to adopt “risk-based pricing” for flood hazards and as the impacts of climate change rise — pushing up costs for insurance companies and their underwriters.
“Without effective policy measures, these pressures will result in unaffordable premiums for some properties, leading households to reduce, or cancel, their insurance cover.”
Additionally, insurers could withdraw cover in some locations as “increasing levels of damage — especially from floods and coastal erosion — make selling cover in those locations unattractive or infeasible”. The phenomenon is known as “insurance retreat”.
Speaking to Q+A, Mercier said retreat could soon affect thousands of homes.
She said the country also needed to establish clear thresholds for insurance affordability.
“We could be seeing tens of thousands of homes uninsurable within 15 years, very easily, I think,” she said. “Some research done recently by Climate Sigma has suggested within 10 years, some areas might be seeing partial retreat and within 15 years, full retreat.
“A lot depends on the extent of climate change. How fast? Whether we get the emissions down? It depends on some areas, sea level rise is going up very quickly. And in other areas, it’s actually going down because the land’s going up.
“Different parts of the country will be affected in very different ways. I recommend you do a bit of Googling about your own property to see whether you’re in any danger.”
Mercier said there needed to be urgent government action to “front foot” the problem, which included determining funding responsibilities for climate adaptation measures.
“We really need to front foot this. We need to be putting in place policies now, so that when partial insurance retreat starts to happen, at a fast rate, we’re ready,” she said.
Q+A with Jack Tame is made with the support of New Zealand On Air
