The Insurance Council of New Zealand (ICNZ) continues to resist the adoption of a UK-style flood reinsurance scheme, citing concerns that such a model may not suit New Zealand’s specific risk environment and could promote development in flood-prone areas.
This position remains firm despite the success of the UK’s Flood Re program and the increasing frequency of extreme weather events in New Zealand.
Flood Re, established in the UK in 2016, was designed to help provide affordable flood insurance in high-risk areas.
The initiative is funded by a levy on home insurers and premiums set according to property values.
While the Association of British Insurers (ABI) has praised the program for its effectiveness in making flood insurance accessible, the ICNZ believes that New Zealand’s situation is too different to implement a similar system.
Earlier this week, the ICNZ joined insurance industry bodies from Australia, Canada, and the UK in addressing a joint letter to their respective governments.
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The industry groups collectively represent around US$200 billion in gross written premiums (GWP).
The letter emphasised the rising hazard risks affecting Commonwealth countries, which are pushing up insurance premiums, particularly in areas vulnerable to natural disasters.
Despite the coordinated call for action, Interest.co.nz’s report revealed that the ICNZ’s position on a flood reinsurance scheme remains unchanged since 2022, when it initially opposed the idea as part of the Labour Government’s National Adaptation Plan.
The ICNZ’s stance remains in place even after major weather events in 2023, including the Auckland Anniversary floods and Cyclone Gabrielle, which resulted in insurance payouts totalling $3.8 billion to date.
An ICNZ spokesperson highlighted that New Zealand faces different challenges than the UK. While 2% of homes in the UK are in flood-risk zones, about 20% of New Zealand properties are similarly exposed, according to the Climate Change Commission’s National Climate Risk Assessment.
The spokesperson also raised concerns that subsidising flood insurance could encourage development in areas more prone to natural hazards, potentially increasing long-term risks.
“There is a risk that schemes that subsidise the cost of insurance will send the wrong signals and encourage people to live in high-risk areas,” the ICNZ spokesperson said, as reported by Interest.co.nz.
The spokesperson added that ICNZ believes a national focus on building resilience, rather than subsidising insurance, would be a more effective strategy for managing New Zealand’s exposure to natural hazards.
The council clarified that there have been no discussions about introducing a flood reinsurance program similar to the UK’s Flood Re in New Zealand. Instead, it continues to advocate for a government-led national framework that addresses natural hazard risks through coordinated action.
According to the council, such a framework would allow for local flexibility, helping communities address the specific challenges they face while ensuring a consistent national approach.
