In recent weeks the spotlight of the insurance industry has fallen on coastal homes endangered by a sea level rise. Now, Insurance Council of New Zealand (
ICNZ) CEO
Tim Grafton has pointed out that no-one knows when and to what degree climate change will take its toll, as well as the amount of houses that will be under threat.
“Therefore the scale of the problem needs to be adequately researched and defined,” he said. “And even if a retreat is necessary at times, there will be a whole bunch of conflicts as to how to deal with the situation and who should bear the cost, i.e. the taxpayer or homeowner.”
He pointed out that some people did not knowingly buy houses in high impact areas, making it harder to expect them to bear the same responsibility as those who knowingly bought houses once the hazards had been clearly defined.
“There’s a complex set of fairness issues here, which also extend to whether an owner of a multimillion dollar property should be compensated in the same way as the owner of a lower-income property, and to what degree do people from other parts of country need to contribute toward the resolution of the problem,” he said.
“It’s not a straightforward question but complicated and worthy of a lot more discussion so that Government and councils can grapple with it from a knowledge base.”
Grafton added that it’s not just Government and insurers that are scrutinising the risks posed by climate change but banks as well, “which will closely look at how much they are prepared to loan and for what time period on endangered properties.”
In addition to coastal erosion, Grafton emphasised that other factors affect properties, like flooding from major storm events, as has recently been the case in New Zealand.
In light of this he strongly advised house buyers going forward to consider the natural hazards a house faces as well as to determine whether it is insurable before signing a purchase agreement.
“And if you can’t get insurance, the bank won’t loan you the money,” he said.
In the next few days Insurance Business will follow up on the relationship between banks, insurers and endangered properties.
Related stories:
ICNZ chief lifts lids on hard-to-insure areas
Coordinated response required for coastal areas
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