High tide is hurting NZ
Updated projections have just changed what we know about New Zealand’s risk from rising seas — and for most parts of the country, the news isn’t good. Science reporter Jamie Morton looks at three big take-aways
Rising seas mean rising risk
If you own a home within a seaside area that’s at risk of a one-in-100-year flood event, you’re likely to lose insurance within your lifetime. Perhaps within the next 10 years. “And if you’re in a place already exposed to a one-in-50-year event,” Belinda Storey says, “then you could lose insurance in a year . . . you could lose it tomorrow”.
The climate risk analyst says that’s the grim reality that coastal homeowners need to be preparing themselves for now.
According to New Zealand’s most recent risk assessment, 72,065 people currently live in areas exposed to that once-a-century risk. About 675,500 people live in areas currently prone to flooding.
But those figures are almost certainly under-estimates.
Main centres like Auckland, Wellington, Napier, Marlborough and Nelson might be facing more than half a metre of rise by mid-century — and perhaps 1.2m by 2100.
With just 30cm of rise enough to make 100-year coastal storm surges and flooding an annual occurrence, fast-sinking parts of our coastal cities could cross that threshold by 2040.
In a recent paper, Storey explored the risk for around 10,000 homes — a figure now likely closer to 40,000 — in Auckland, Wellington, Christchurch and Dunedin that lie in onein-100-year coastal flood zones.
International experience and indications from New Zealand’s insurance industry suggest companies start pulling out of insuring properties when disasters like floods become one-in-50-year events.
By the time homeowners’ exposure had 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.
“People assume that if they pay their premiums on time and don’t engage in insurance fraud, then insurance will always be there for them,” said Storey, managing director of Climate Sigma.
“But if the risk becomes too great for the insurer, they have no obligation to continue your insurance.”
Even a small amount of sea level rise could shift the probability of flood to five per cent each year; in the UK, insurers signalled they’d pull cover if that risk reached only 1.3 per cent.
Last year, in what was the industry’s costliest for extreme weather claims, Tower took the symbolic step of becoming New Zealand’s first insurer to begin making modelling flood risk, and making ratings public.
Insurance Council chief executive Tim Grafton said that, while underwriters already had some of the best data available, the new sea level rise data was welcome.
Because risk assessments were typically carried out on a regional rather than local basis, it allowed better definition.
Banks should be worried too
Considering one estimate of the current rateable value of exposed residential property, $17b worth of homes could be at risk.
Add together all private and public properties and assets lying in coastal floodplain areas, and that sum climbs to nearly $150 billion.
In spite of scientists’ warnings, Storey said the property market had barely recognised the risk.
“At the moment, places that have a clear time limit on them are experiencing just a small discount, or only about four per cent, when it should be 30 or 40 per cent.”
Despite rules requiring mortgagors to insure, a general absence of compliance checks meant banks didn’t know whether some properties they mortgaged remain insured beyond the first year of ownership.
But Storey expected that new climate-risk reporting requirements for banks and other institutions should have a positive effect.
“If you’re a bank with 500,000 houses in your portfolio and only about 10,000 of them are at risk on the coast, you’re probably not going to be too worried about that,” she said.
“But if you find 100,000 homes in your portfolio could face insurance retreat because they’re on an inland floodplain, you’ll be more worried.”
Otago University researcher Associate Professor Ivan Diaz-Rainey, who is leading a major study investigating this issue, points out that more than 60 per cent of the four largest banks’ loan portfolios are made up of housing loans.
That meant just a relatively small proportion of stranded assets posed a threat to financial stability.
Even if exposed homeowners might have some insurance in place, Diaz-Rainey said banks might begin thinking twice about lending.
Storey felt that while we couldn’t completely rely on market forces to address the problem, she feared that backing property owners with public insurance could prove its own disaster.
“If there’s any hint of the Government providing insurance, we’ll just keeping building more houses in these places and making the problem worse.”
Given thorny issues around legal powers, resourcing, funding and risk of litigation that come with it, councils have been increasingly calling on Wellington for support and guidance.
At the centre of the Government’s response is an ongoing legislative reform to replace the Resource Management Act, and a draft national adaptation plan it’s just asked for public feedback on.
While councils say they can’t afford to bear all of the costs, Climate Change Minister James Shaw has made it clear the Government won’t be footing the entire bill either.
Councils can act now
More than $2b of now-vulnerable homes have been built within roughly the last decade, and development in at-risk spots is still being consented today.
In the absence of tougher laws and regulations, planning and development practices continue to focus on trying to instead manage the risk, through measures like raising houses or building hard barriers.
Such steps are all but certain to have only a temporary effect, commentators say, and will simply transfer costs on to future generations as the problem worsens.
At the extreme other end of the scale is managed retreat, which sometimes involves shifting entire communities out of the firing line.
Unlike other countries, New Zealand has little experience with this measure — and the near two-decades and $17m it took for a council to buy and relocate 16 exposed homes in the Bay of Plenty town of Matatā offered a taste of the enormous cost and effort that’d be involved in repeating that at scale.
Shaw said one suggestion within the draft adaptation plan was to make government coastal hazard guidance for councils “more directive”.
“While that places requirements on councils, in many ways, it also makes it easier, because there is a clear set of rules you need to follow,” he said.
“It also provides a legal back-stop for councils under pressure from developers to open up areas that might be inappropriate to build on.”
At the same time, commentators say councils shouldn’t be waiting on the Government to do more now.
Last year, for instance, experts said that by making better use of existing rules, councils could shift away from building sea walls and avoid signing off on risky consent applications.