In New Zealand, the threat of climate change and the impact this will have on our small country is imminent. In a recent report completed by the Ministry for the Environment, changes such as temperature and rainfall are already creating problems with the more frequent occurrence of extreme weather events.
During summer, the higher temperature rises mean the regular occurrence of droughts and with more intense rainfalls during the winter months, flash flooding also becomes a great concern. Also, with the change of climate comes the risk of rising sea levels, which creates erosion, coastal flooding and saltwater intrusion especially on coastal inhabited areas. What many New Zealand residents do not realise, is that with these climate change events comes many risks involving the insurability of houses and properties and the increasing rise of premiums by domestic insurance providers.
In the instance of properties located on coastal areas, as sea levels continue to rise the risk of claims made to domestic insurance providers also heightens. As insurance patterns begin to make an appearance in these areas, excessive premium increases will begin to be enforced and some insurance providers may decline the insurance completely.
Increases in premiums will not just affect residential coastal areas, but also inland areas susceptible to flooding or landslides. As the events of climate change are no longer just patterned events but occurring rapidly, insurers will inevitably reassess their insurance guidelines. This will be impacted by either increasing costs, altering the terms or refusing to renew policies. Therefore, leaving many homeowners vulnerable with their homes deemed uninsurable.
Ministry for the Environment’s climate change impact estimates show that over $19 billion of New Zealand properties are currently under threat due to the impending risks of coastal eroding and increased flooding. Over 9,000 homes and 4,000 commercial buildings are at serious risk should a sea level rise of 50cm occur. According to Jan Wright, ex-environment commissioner, this 50cm could equate to $3 billion in replacement costs for insurance companies.
As New Zealand has become the 2nd most nation at risk for national disasters, insurance companies may also decide to cancel the inclusion of Natural Disaster Cover within the policy wordings. With this we may see insurance providers treat this cover much like California’s current Earthquake cover, where it can only be obtained for an excessive premium amount per year.
If a home is deemed uninsurable due to factors relating to climate change or natural disasters, banks may begin pulling or refusing loans, leaving homeowners left with a terrifying reality.
On a more positive note, there are ways to ensure these events do not affect your home loan, equity or insurability. If you are interested in learning how, book a complimentary introductory appointment with one of our Advisers today to ensure you remain covered by your domestic risks’ insurance should you ever need to claim.