Climate change & insurance
The extent to which climate change threatens New Zealand’s coastal housing will depend on insurance options available to homeowners, according to a new report.
The Insurance, Housing and Climate Adaptation report – commissioned by the Deep South National Science Challenge – investigates the different challenges climate change will present to homeowners, insurers and government.
A collaboration between Motu Economic and Public Policy Research, Victoria University of Wellington and the challenge, the report highlights issues New Zealand may face as it grapples with the risks climate change poses for coastal housing, especially through sea level rise.
Across the country – in regions with high-quality data – there are over 43,000 homes within 1.5 metres of the present average spring high tide, and nearly 9,000 within 50 centimetres. The most optimistic emissions scenario has global average sea levels likely to rise between 44 and 55cm by 2100.
One of the report's authors, Professor Ilan Noy, said the aim was to highlight the need for "a lot more research on this issue of sea-level rise and insurance of residential properties".
Prof Noy, who holds the Chair in the Economics of Disasters at Victoria University of Wellington, said at some unknown point in the future, there would be thousands of properties no longer insurable by private insurance companies. This could happen gradually, or suddenly in response to an event in New Zealand or overseas, and the number or location or properties are unknown.
University of Otago Honorary Research Fellow Dr Jim Salinger said the topic was important, considering 12 out of the 15 largest towns in New Zealand are at or near sea level, "thus at high risk from sea level rise".
"Major decisions are required in coming years on whether central and/or local government protect, adapt or retreat from areas prone to sea level rise and flooding," he said. “The costs of protection are phenomenal. A national strategy is required because of the land and housing at risk from storms and flooding."
Dr Judy Lawrence, co-chair of the Government's Climate Change Adaptation Technical Advisory Working Group said the report put a "spotlight on the role that insurance and the finance sectors might play in the ongoing response to climate change impacts".
"They can either transfer risk to the Crown or private property owners, or work in tandem to reduce the exposure to risk and deal with the legacy effects of past decisions at the coast and on floodplains."
The report laid out six high-priority research questions, including how sea level rise risks currently fall across different parties, what policy options are available for when the tipping point of uninsurability is reached and what those tipping points would be.
The report is available here. The SMC gathered expert reaction to the report.