The newly elected National-led parliament may be more interested in “adaptation” measures for climate resilience as opposed to “mitigation” ones, according to Climate Sigma managing director Belinda Storey.
In a Bloomberg video interview, Storey said that Luxon and company will be more likely to respond with potential investments in infrastructure, including seawalls, stop banks, and levees, as opposed to full-blown “managed retreats.”
That said, Storey said that there is still the question of an exodus of private insurers – much like the ones that happened in the US – should climate disasters be more prevalent, and if the public insurance sector is set to step up in case it happens.
“That is likely to be a significant concern to reinsurance,” Storey said. “New Zealand is a very attractive market in terms of reinsurance for our earthquake risks because we [are] uncorrelated with other parts of the world. But if there is an extension of the public mandate to provide public insurance when private insurers pull out, it's very unlikely that reinsurers are going to be wanting to pick up that risk.”
Storey, who coined the term “insurance retreat” in 2017, found that this trend was going to occur in many cases decades before properties were affected. It has become somewhat of a hot topic in Aotearoa, given that a significant number of private properties stand to lose insurance in the next decade or two, Storey said.
She went on to explain that these kinds of retreats need to happen, and it must be prioritised over rebuilding to save on future costs.
“We've had Cyclone Gabrielle and Auckland anniversary events. The simplest step is to simply move people out of harm's way. We have a house [that] has been damaged by a major event – a buyout makes sense. We need to put a cap on it so we're not providing compensation for extraordinarily high valued houses – but we should be moving houses. We shouldn't be rebuilding, because what we can see from climate change is that those houses are going to get hit again during the design life,” Storey said.
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