New Zealand’s insurance industry is considering a nationwide risk-rating system for properties to address increasing climate-related risks.
This proposal was a key topic at the Insurance Council of New Zealand’s "Getting Resilience Right" conference in Auckland on Tuesday, where insurers, government officials, and banks discussed how to manage the financial impact of more frequent and severe natural disasters.
The Post reported that a key concern is how to prevent development in high-risk areas. The discussion considered whether insurers should refuse coverage, banks should withhold financing, or governments should impose building restrictions.
While there is agreement that climate change is increasing natural hazards, uncertainty remains over who should bear the financial burden.
James Shaw, former Green Party co-leader and now operating partner at Morrisons, said the insurance industry will play a key role in climate adaptation. He pointed to risk-based pricing – where premiums reflect a property's exposure to natural hazards – as a likely path forward.
About 25% of properties in high flood-risk areas already face additional premiums. Shaw warned that some homes may become uninsurable, impacting bank financing.
A 2023 report by the Helen Clark Foundation and engineering firm WSP estimated that by 2050, around 10,000 coastal properties in major cities could become uninsurable due to coastal erosion.
Shaw called for a clear framework defining who is responsible for managing climate risks.
“Absent that framework, you get the kind of ad hoc response we’ve seen in pretty much every other disaster, which is the insurance industry does what it can, and then ultimately, central government flies in with a bucket of money and kind of tries to clean up the mess to the best it can," he said.
Shaw added that insurance claims from natural disasters have increased as a share of GDP since 2007.
The Post also reported that industry leaders supported mandatory property risk ratings.
“We need a risk rating on every property in New Zealand,” IAG New Zealand head Amanda Whiting said, arguing that better data could guide safer rebuilding.
Meanwhile, Tower chairman Michael Stiassny suggested that pricing properties based on their specific risks would increase public awareness.
Ben Kelleher, risk manager at ANZ, said property transactions lack transparency. He argued that buyers and sellers should have equal access to natural hazard data, noting that the current "buyer beware" system creates unfair outcomes.
Although the former Labour government began efforts to include hazard information in property records, these initiatives have stalled.
Climate Change and Local Government Minister Simon Watts said new climate adaptation legislation is expected later this year.
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