Insuring the Future

Aotearoa faces multiple natural hazard risks, both seismic and weather-related. Partly for this reason, the cost of residential property insurance is relatively high, certainly by European standards. Moreover, average premiums have risen dramatically in recent decades. According to StatsNZ, the average cost of house insurance has increased by over 900% since the year 2000, with a substantial proportion of this increase occurring since 2022. As a result, insurance affordability issues are escalating. Additionally, over the coming decades, the impacts of climate change, including more severe flooding and sea level rise, are bound to reduce the availability of residential property insurance in high-risk locations. But reduced insurance affordability and availability will likely harm societal resilience.

Drawing on various overseas policy approaches, this presentation will explore the longer-term policy options for residential property insurance, and especially natural disaster insurance, in the context of increasing climate-related risks. The options include extending the role of the Natural Hazards Commission to include the full range of climate-related perils, replacing the Commission’s role as the first-loss insurer of specified perils with different cover arrangements, and expanding the current regime of means-tested insurance subsidies. Every option has disadvantages.