CLIMATE OF FEAR
THOUSANDS OF HOMES FACE INSURANCE HIKES
Thousands of seaside homes nationwide could face soaring insurance premiums — or even have cover pulled entirely — within 15 years. That’s the stark warning from a major new report assessing how insurers might be forced to confront the nation’s increasing exposure to rising seas — sparking pleas for urgent Government action.
Nationally, about 450,000 homes that sit within a kilometre of the coast are likely to be hit be a combination of sea-level rise and more frequent and intense storms under climate change.
The findings coincide with Prime Minister Jacinda Ardern being poised to declare a climate change emergency in Parliament today.
The report, published today through the government-funded Deep South Challenge, assessed the risk for around 10,000 homes in Auckland, Wellington, Christchurch and Dunedin that are sited in one-in100-year coastal flood zones. That risk is expected to increase quickly.
In Wellington, only another 10cm of sea-level rise, which is expected by 2040, could push up the probability of a flood five-fold — making it a onein-20-year event.
International experience and indications from New Zealand’s insurance industry suggest companies start pulling out of insuring properties when disasters such as floods become one-in-50-year events.
By the time that exposure has risen to one-in-20-year occurrences, the cost of insurance premiums and excesses will have climbed sharply — if insurance could be renewed at all.
The report found about 540 exposed homes in Auckland, with median coastal flood premiums for once-in-a-century events of $2000, could reach that one-in-20-year threshold with just 15cm of sea-level rise.
If insurance was still available at that point, premiums would have soared to $10,000 per property.
For the 1740 Wellington homes modelled, median premiums could jump from $1800 to $8700 if seas rose 12cm higher.
In the South Island, 4850 properties in Christchurch and 3100 in Dunedin, could see premiums leap from $1600 to $7600 and $7900, with 13cm and 14cm of sea-level rise respectively.
The research also suggested that just small increases in the sea level would probably cause at least partial retreat by insurers for most of those 10,000 homes, within only 15 years.
Insurance remained a requirement for residential mortgages, and failing to maintain them could trigger defaults.
While mortgages were often granted with repayment periods of up to 30 years in New Zealand, insurance contracts were renewed annually. An insurer could exit a market within 12 months, while a lender could still have decades before their loans matured.
Despite rules requiring home insurers to get insurance, a general absence of compliance checks meant banks at the moment didn’t know whether some properties they mortgaged would remain insured beyond the first year of ownership.
Insurance Council of New Zealand chief executive Tim Grafton said he expected that climate risks would continue to be signalled by insurers through price and excesses.
“Insurers are likely to continue to cover existing homeowners in climate change or natural hazard-threatened areas, but we can expect premiums and excesses will increase,” Grafton said.
“That might mean a floodplain property will have a $500 excess for fire damage but a $10,000 excess for flood damage.
“However, some companies might choose not to take on new customers in areas that have a known higher risk to sea-level rise and flooding in 15 to 20 years.”
Insurers needed to work with customers to ensure they understood the reasons and costs that came with pricing certain risks, he said.
Meanwhile, homeowners were still choosing to buy, develop and renovate coastal property, and new houses were being built in climate-risky locations, said the report’s lead author, Dr Belinda Storey of Climate Sigma. “People tend to be very good at ignoring low-probability events.
“This has been noticed internationally, even when there is significant risk facing a property.
“Although these events, such as flooding, are devastating, the low probability makes people think they’re a long way off.”
Storey felt that market signals weren’t enough to effect change — and the Government could play a bigger role informing homeowners of risk.
Grafton said the insurance sector continued to push for adaptation measures and backed a recent recommendation for the Government to create a dedicated Climate Change and Managed Retreat Act.
“We also strongly advocate for local government to take a long view out 50 to 100 years and not to consent to developments in high-risk areas,” he said. “The sooner we adapt to our changing climate, the less adaptation will cost us and the less we will be impacted by the increasing frequency and severity of storms.”
Local Government New Zealand agreed clearer rules, guiding where people could live and build, would also help councils “stuck between a rock and sea-level rise”.
“Certainty in the adaptation space would also help insurers, and make their business model more sustainable and less prone to sudden swings in risk pricing,” a spokesperson said.
Climate Change Minister James Shaw said nationwide risk had been mapped out by an assessment published this year.
“Based on this, we are currently working on a National Adaptation Plan.”
What is a climate change emergency?
We can generally think of it as a symbolic acknowledgement at the highest levels that we are facing a climate change crisis – and a commitment to meet the challenge. Climate Change Minister James Shaw described the motion, expected to pass with flying colours when it is tabled in Parliament today, as a “clear statement” of intent to tackle the crisis.
He said the Government would develop policy over the next three years to ensure it is backed with action to bring emissions down.
As of this year, 28 countries – including the UK, Ireland, Canada, France, Austria, Spain, Japan and South Korea – have made similar declarations, as has the state of South Australia, and more than 1400 local governments, including Nelson, Wellington and Auckland. But a declaration did not commit a body to any binding set of actions.
Dr Raven Cretney, a Waikato University researcher who has been studying declarations with Lincoln University colleague Dr Sylvia Nissen, described those made here as largely symbolic.
“While this is not a bad thing in and of itself, I have some concerns around the use of emergency language as potentially nurturing an approach to climate action that is built on fear and panic.”
Jacinda Ardern said Labour had always considered climate change to be “a huge threat to our region”.
”[It is] something we must take immediate action on.”
She said the previous government was unable to declare a climate emergency in the last term.
Why is climate change now an emergency?
As more than 11,000 international scientists put it last year, the planet “clearly and unequivocally” faces a climate emergency. Despite 40 years of global negotiations, the world had largely failed to arrest the crisis – and they called for “bold and drastic” changes in economic growth and population policies to cut emissions. A government report set out how our own climate was transforming. New Zealand’s national average temperature has risen by 0.10C a decade since 1909 – but that rate has
quickened to 0.31C a decade in the past 30 years.
Places around the country have been seeing more heatwave days, fewer frosts, shifts in rainfall and higher seas, with implications for everything from human health to more pressure on our threatened species.
If global emissions continue to increase, by 2090, warm days – where the maximum temperature is 25C or higher – are projected to occur four times as often in Auckland. Even if emissions are reduced to limit global warming below 2C, these days would still increase by just over half.
How is New Zealand exacerbating the crisis?
Kiwis might contribute just 0.17 per cent to global emissions – but that contribution is embarrassingly outsized.
Our net emissions have shot up by nearly 60 per cent in just two decades – and three years ago, the 7.7 tonnes of CO2 that each Kiwi pumped into the atmosphere put our country at 17th out of 32 OECD countries for emissions.
Our largest source of CO2 emissions come from road transport and we effectively import emissions when we use goods and services from overseas.
But most of New Zealand’s greenhouse gases still stem from agriculture. Methane – mainly burped from livestock – made up nearly half of our gross emissions in 2018. Globally, emissions are expected to keep rising.
At the current rate, the global average temperature is likely to cross the threshold of 1.5C above the preindustrial level within the next 10 to 30 years.
Deep cuts to net emissions would be needed to hold warming to 1.5C – about 45 per cent below 2010 levels by 2030, and net zero by about 2050.
What is this Government actually doing about it?
It halted new offshore oil and gas exploration permits, overhauled the Emissions Trading Scheme (ETS) and placed a cap on it to make it a more effective carbon price tool, and invested in alternative energy efforts – namely green hydrogen.
Last month, it launched a new $70m fund to help Kiwi companies switch from coal and gas to clean energy for process heat.
It’s set up an advisory Climate Change Commission, and can boast about finally putting in place binding, climate-targeted legislation.
Yet the Zero Carbon Act’s net-zero 2050 target doesn’t apply to biogenic methane, which makes up a third of our gross emissions, and instead needs to come down by between 24 and 47 per cent by mid-century. Along with walking away from a previous pledge to electrify the government fleet by 2025, the Government has drawn scorn in opting against bringing agriculture – our biggest emitting sector – into the ETS, in favour of an industrygovernment partnership.
And if agriculture is forced into the ETS, that won’t happen until 2025, when it would receive the same 95 per cent discount deal industries like steel have been given.
It already looks unlikely New Zealand’s climate pledges under the Paris Agreement will be strong enough to meet the UN’s aspiration to limiting warming below 1.5C.
What do experts and advocates think about a declaration?
Cretney, from Waikato University, hoped it would prove more than that. “If the emergency declaration remains a symbolic gesture, as we have seen elsewhere in the world, then I think it will be important that our communities continue to hold the Government to account for their pledge to take real action on the climate crisis.”
Dr David Hall, a lecturer at AUT University, pointed out when a council or government made a declaration, it was not suspending laws to make a decision it otherwise wasn’t able to.
“On the contrary, the New Zealand government, after declaring a climate emergency, will face the same political constraints that it did prior to the declaration,” he said. “Urgent action is required, but the fastest transition will be the one that buoys people along, rather than makes them dig in their heels.” Kiwi climate campaigner David Tong, of Oil Change International, said: “For this week’s declaration to be meaningful, policymakers across government will need to use it to justify rapid, transformative action and New Zealanders will need to use it to push the government to take real action now.” Tong felt the government had done too little to actually cut emissions urgently. “Treating the climate crisis like the emergency requires transformative, urgent action,” he said. “Putting a cap back on the emissions trading scheme is critical, but that’s undercut by plans even now to give polluters free allocations until 2050 and beyond.”