The New Zealand Infrastructure Commission/Te Waihanga has released a report assessing how insurance can support infrastructure resilience against natural hazards and climate-related risks.
The study, “Invest or Insure? Preparing Infrastructure for Natural Hazards,” considers different strategies for mitigating risk, including investing in resilience measures or relying on insurance to transfer financial exposure.
New Zealand’s location exposes it to frequent and severe natural hazards, including earthquakes, flooding, volcanic eruptions, and tsunamis. Infrastructure and population centres are often positioned in high-risk zones near coastlines, rivers, and fault lines, heightening the country’s vulnerability.
While these events do not occur regularly, when they do, the financial and operational impacts on infrastructure can be significant. The report noted that the cost of rebuilding public infrastructure following the four most severe events since 2012 has exceeded $10 billion.
Without sufficient preparation, natural hazard events can disrupt essential services, slow economic activity, and pose public health risks, according to the report.
The report emphasised that no universal approach exists for addressing natural hazard risk in infrastructure planning. Instead, the most effective strategy will vary depending on factors such as the likelihood of an event, the potential consequences, and the cost-effectiveness of different risk management options.
Key takeaways from the report:
Infrastructure New Zealand has acknowledged the report’s findings, highlighting the challenges faced by infrastructure providers in determining how to manage natural hazard risks.
Martina Moroney, advocacy and strategy lead at Infrastructure New Zealand, noted that the report emphasised the key role that infrastructure providers play in the country’s preparedness to natural disasters and the choices they have to reduce the structural and fiscal risks associated with those.
“Different infrastructure in different places faces different risks, and the decision of an infrastructure manager to invest in resilience, focus on managing the fiscal risks through insurance, or defer action until after a potential event occurs may all be viable options depending on the circumstances,” she said.
Moroney pointed to the government’s commitment to introducing a national adaptation framework later this year, saying that infrastructure providers need further clarity on the role of central government and how responsibilities and costs will be distributed.
“It is encouraging that the government has recently committed to progressing policy development on a national adaptation framework and will introduce legislation later this year,” she said. “Infrastructure providers, including local government, require more clarity about the role of central government and a better indication of where responsibilities and costs lie.”
The Insurance Council of New Zealand Te Kāhui Inihua o Aotearoa (ICNZ) also expressed support for the government’s planned climate adaptation legislation, which aims to address increasing risks associated with climate change.
ICNZ chief executive Kris Faafoi said the insurance sector welcomes clear policy direction to help communities, businesses, and insurers prepare for rising natural hazard risks.
“New Zealanders need certainty about the way natural hazard risks from climate change are going to be managed, and government leadership in this critical area is welcome,” he said.
The government’s proposed framework follows recommendations from the Finance and Expenditure Select Committee’s inquiry into climate adaptation.
Infrastructure New Zealand will host an Infrastructure Resilience Conference in March, bringing together government representatives, industry experts, and policymakers to discuss strategies for enhancing infrastructure adaptability.
The conference will explore funding models for resilience projects, policy responses to managed retreat, and the role of insurance in mitigating climate risks.
The event is scheduled for March 18-19 in Auckland.
