In December, the federal government announced that planning ministers were developing a national standard for including disaster and climate risk in land use planning.
Poppy Foxton (pictured above), national head of corporate insurance and risk solutions for Honan Insurance, sees this initiative as further evidence that federal and state governments are “ramping up” their actions around climate change.
“I feel like the conversation has shifted,” said Sydney-based Foxton.
Foxton cited other federal and state government moves including the $800 million home buyback scheme for up to 2,000 Northern Rivers residents and the NSW government’s $100 million scheme to acquire land and open up new flood safe locations for development.
“When we went through the 2011 Brisbane floods, the conversation from the government was really looking to the insurance companies and saying flood should be covered and insurance should really be there to protect these business owners and these homeowners,” she said.
Foxton said, at that time, there was a lot of pressure on the industry to clarify flood coverages and how flood was defined.
“Off the back of that the insurance industry worked very hard to come up with key fact sheets, summary coverage sheets and really easy to understand explanations on what is covered under a policy,” she said.
However, Foxton said, this didn’t solve the ongoing issue of communities and businesses continuing to be impacted by flood events and the unaffordability issue this presented to insurers.
“For a lot of insurers, it’s just not feasible to write flood covers for these communities and businesses - particularly as these flood events become more and more expensive,” she said.
The rolling sequence of nationwide floods during 2022 seems to have brought that message home.
“Last year, a lot of businesses and communities were impacted, not just once, but twice and continually,” said Foxton. “It’s very hard to recover from multiple flood or fire impacts and for a lot of businesses it was absolutely devastating and some of them didn’t get back on their feet at all.”
The recent government initiatives, she said, have shifted the pressure away from a focus on insurers only, to working out how the community should respond and how the government can fund and plan future development away from flood zones.
“Or if we are [building in flood zones], that building codes and the standards are lifted, so that the homes in those areas are more resilient when we do have a major event,” said Foxton.
She suggested that now the government, rather than insurers, is in the hot seat.
“I think the pressure is really on,” said Foxton. “These are slow moving projects and there’s a lot of pressure from the communities but I think it’s certainly something that they’ll be considering when they go to vote.”
Probably more than ever before, climate risks and resilience are a focus of a brokerage’s risk management work for clients around property assets.
“When we are planning for a client’s renewal our first question is ‘where are you planning to develop?’” she said. “One of the key questions we ask is the location around depots and warehouses and the criteria for selecting an asset and does it take into account flood mapping and whether it’s in a flood zone?”
Foxton said once her firm understands a client’s plans they provide advice around the flood mapping tools insurers provide, whether the asset is in a flood prone area, and, if it is, what coverage would look like.
“It’s our job to give them an indication of the challenges they’ll face in getting coverage under an insurance program, whether it’s pricing or the level of deductible that they’ll have to take,” she said.
Foxton said one challenge for the industry is that even the most sophisticated floods maps can be out of date.
“It’s not because they’re not updating them but what we’re starting to see is the areas that were previously not considered flood prone are starting to become impacted by floods,” she said.
Foxton said the build-up of water after storms is now causing more flooding in low lying areas that aren’t near natural watercourses.
“So it’s becoming difficult for insurers to map out where these areas are going to be hit,” she said.
However, as someone from the insurance industry, Foxton said she is “really pleased” to see the government focused on the whole issue around climate risks and land development.
“We need to look at the long term horizon,” she said. “Insurance has to continue to be sustainable and affordable and there is only so much of that risk that you can transfer to insurance.”
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