The Climate Change Adaptation Technical Working Group (CCATWG) has released a new report looking at how New Zealand can adapt to the impact of climate change, addressing the need to assess and proactively plan for disaster-related risks. It has been welcomed by Local Government New Zealand (LGNZ), which says that insurance is a key aspect when it comes to preparation for major climate events.
Despite the increasing risk of extreme events such as flooding, droughts and wildfires, New Zealand is only in the early stages of planning for adaptation to its aftereffects. In order to sustain effective climate change adaptation, CCATWG says the focus must be on anticipating and preventing future risks rather than responding to changes as they occur.
According to the working group’s report, insurance is one of the sectors with the ‘greatest potential for leveraging change.’
“We are pleased to see that CCATWG’s report has picked up on the need for what local government has been calling for,” says LGNZ president Dave Cull. “We need to have conversations about sensitive issues that we must address if our communities are to be resilient, such as how to manage the relocation of communities shown to be at risk in a national risk assessment, and whether existing insurance models are sufficient.”
Brokers and insurers have expressed willingness to work with local and central governments, and have emphasised risk mitigation as a key challenge that needs to be addressed.
New Zealand does not have a strong track record of investing in risk reduction, and anticipatory funding to reduce risk and prevent future losses is ‘largely non-existent’, according to CCATWG. The Insurance Brokers Association of New Zealand (IBANZ) says governments must focus on mitigating climate-related risks if insurance is to be an effective tool in post-disaster recovery.
“It needs to have up to date products and offer advice on what’s changing, and it needs to be able to react quickly. So insurers will either increase their premiums where the risk is increasing, but if it gets sufficiently bad and becomes unavoidable, they will inevitably withdraw from offering cover on that risk.”
According to Young, Australia’s increasing focus on risk mitigation should fully apply to New Zealand when it comes to events such as floods and natural disasters.
“You can’t expect the insurance industry to pick up risks when nothing is being done to mitigate them,” says Young. “Both the Government and the insurance industry have an interest in protecting people and businesses, so they should be working together to come up with solutions that are economically viable.”
“Higher-risk areas would inevitably pay a higher premium,” he continues. “Insurers will look more closely at where the higher risks are, and end up charging more so that lower-risk areas don’t end up subsidising those areas. That would likely lead to customers in high-risk areas asking if there’s anything central or local government can do to mitigate those risks, so that they can continue to survive in those areas and benefit from insurance protection.”
CCATWG’s report recommends the establishment of a centralised advice service that provides risk-based decision-making expertise to local governments, and would help manage the risks associated with both climate change and other natural disasters, such as earthquakes.
“We are looking forward to working with the Government on addressing the adaptation challenge,” Cull concludes. “Real and urgent action now is critical – we can’t rest on our laurels any longer.”