Risk and rising seas

This Issue This is a part of the Climate change feature

By - , Build 156

Climate change is already causing rising sea levels, putting coastal properties at risk. Work by the Insurance Council and local government is identifying and evaluating this risk and considering adaptation measures.

Kiwis love to live close to the sea.

WHEN SEA LEVEL RISE from climate change gets a mention, the first question property owners living by the sea ask is, ‘Will I still get insurance?’

Having insurance that is available and affordable matters a lot. But one thing insurance cannot do is get rid of the risk of something happening. Insurance only transfers risk from the homeowner to the insurer.

The willingness of an insurer to take on a risk reflects their appetite for it, and if prepared to take it on, they will price the risk accordingly. So, the higher the risk, the higher the premium or excess.

In some instances, insurers won’t take on a risk if the probability of something occurring gets too high or certain.

Check the policy for exclusions

Insurance is to cover people for unforeseen and sudden events and to put them back to where they were immediately before the event. This means the risk remains.

So, what about houses by the sea or on clifftops? Coastal areas face continual erosion and subsidence, so most house policies exclude damage arising from these risks unless it’s a natural disaster covered by EQC.

Kiwis love to live close to the sea.

Increasing coastal flooding

The world now lives with the certainty that the sea level will rise, but sea level rise is not an EQC cover. The extent of sea level rise is uncertain, but as it does rise, the frequency, duration and extent of coastal flooding will increase. It will be more pronounced when combined with storm surge, king tides and heavy rain.

The Parliamentary Commissioner for the Environment’s 2015 report on sea level rise identified that $20 billion of New Zealand assets today lie within 1500 mm of spring high tides. Sea levels are projected to rise over 80 years or so between 280–980 mm.

An important factor not included in that report, which would likely underestimate the impact, is the quality and capacity of urban stormwater systems. Much of this infrastructure was installed decades ago, long before the impact of climate change was known.

15-point plan for better natural hazards

The Insurance Council has developed a 15-point plan to better protect New Zealand from natural hazards. The plan urges decision makers to implement a range of legislative and strategic recommendations because New Zealand remains one of the most vulnerable countries to the impact of natural disasters for an economy of our size.

Insurers through the Insurance Council are working with local government, which is at the ‘windface’ of climate change impacts. What’s encouraging is that the identification, assessment and evaluation of the risks communities face is under way in many parts of the country.

Risk identification starts with understanding what your objective is. Do you want to avoid all property damage or just some – what’s tolerable? Then, assess the likelihood and impact of that loss occurring, bearing in mind that a low probability may correspond to a very high risk. Some value judgements will need to be made, but these should be explicit so they can be open to debate.

Adaptation measures to reduce risk

The tough but all-important call is how to treat the risk to an acceptable likelihood and impact. Adaptation measures to reduce risk are critical because, without them, future losses will be large.

How much to spend on adaptation measures should involve a cost-benefit analysis. The annual expected losses should not exceed the tolerance for loss. There is a range of tools to reduce risks, some of which don’t need to involve great cost, but some measures will.

There is limited integration across the key pieces of legislation to address natural hazards planning at both local and central government. It is pleasing to see the inclusion of natural hazards in the Resource Management Act.

Future-proofing new developments

Where new development is being consented, a long view should be taken to future-proof against natural hazard losses – after all, houses are built to be around for many decades.

So, where it makes sense, requirements should be placed on developers to lower flood risk, for instance, with elevated finished floor level, large-capacity stormwater systems or elevated land solutions.

Flood-proof and flood-resilient building solutions such as protective barriers can be put in place to protect properties. Of course, consents should not proceed if it invites a future disaster because it is not possible to mitigate the risk.

Incremental improvements

Retreat from coastal areas is an option over the long term where the risk will become too high or it makes no economic sense to protect. But even within existing flood-prone areas, it is possible to adapt using measures like flood barriers, building pumping stations and upgrading existing infrastructure.

Improving flood warning systems and taking positive action to reduce claims costs should be looked at too.

Taking incremental steps to adapt each year will make it more affordable to adapt and has the positive benefit of making communities safer and sustainable. Central and local government both have a part to play in risk reduction. Insurers have a part to play with innovative pricing that recognises risk reduction from adaptation or from greater risk sharing with the property owner.

Frequent, repeat flood events will over time lead to higher premiums or high excesses or even withdrawal of flood cover. No one wants the situation where those on low incomes in high-risk areas cannot afford insurance protection.

For more

The Insurance Council’s 15-point plan is available at www.icnz.org.nz.

Download the PDF

More articles about these topics

Articles are correct at the time of publication but may have since become outdated.

Kiwis love to live close to the sea.

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