Climate change and the withdrawal of insurance in New Zealand
Slow and sudden onset thresholds for private insurance retreat under climate change in New Zealand
Coastal hazards are escalating with climate change. In particular, coastal homeowners can expect both sea level rise and more frequent and intense coastal storms. However, we see continue to see demand for housing through new coastal residential development and intensification of existing urban areas on the coast. This suggests that climate change related escalating coastal hazards are not yet fully reflected in home-owners decisions to purchase and renovate coastal property.
Consequently, climate risk may not currently be incorporated into the price of residential coastal property.
Evidence from overseas suggests that high insurance premiums and the unavailability of insurance has a stronger impact on private decision making than the uncertain risk of extreme events. Drawing on this, this project will explore how coastal housing markets impacted by climate change may respond to “insurance retreat” – if insurance becomes unavailable.
The project will identify those locations most likely to lose access to insurance within the next few decades (as the probability of extreme events increases).
The project will also estimate the direct economic losses on residential property of an extreme coastal storm making landfall in Tauranga City, to determine whether this size event could trigger reinsurance retreat (the withdrawal of the international insurers, who insure our local insurance companies) from other coastal locations in New Zealand.
Project contact: Belinda Storey, Climate Sigma
Project budget: $110,000
Project duration: December 2017 – June 2019
This project in the media:
Coastal properties may lose insurance RNZ (Jesse Mulligan)
The risks of living near the ocean Newsroom
How climate change could send your insurance costs soaring Stuff.co.nz
What you need to know about the previously withheld climate report Stuff.co.nz
Climate change and insurance: Expert reaction, Science Media Centre
Insurance: the canary in the coalmine of climate change? Idealog
How can NZ insure homes for climate change? NZ Herald
Sea level-prone homes set for insurance cutoff, RNZ
Heads in the sand, houses in the water, Newsroom
Breaking the ice, NIWA
Latest news and updates
2018 may well be the year New Zealand gets serious about adapting to our changing climate. Last year, and the start of this one, gave all of us plenty of opportunities to experience a future in which creeping sea level rise and extreme weather – from drought to flood to surprise storm surges – make day-to-day life more precarious and more expensive.
In October 2017, the Deep South Challenge released a report into the state of the nation’s storm and waste water infrastructure, in the face of a changing climate. The report garnered significant media attention – not surprising given the infrastructure is currently valued at well over $20 billion.
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