Every day of climate inaction means new losses – report

Every day of climate inaction means new losses – report | Insurance Business

Every day of climate inaction means new losses – report

Every day that passes without clarity on climate change adaptation policy brings new losses, says one expert.

According to University of Otago professor Lisa Ellis, New Zealand is investing in risky coastal development without knowing who will protect those investments or how they will be protected.

Her comments follow the release of the Productivity Commission’s draft report on local government funding, which highlighted climate change as an increasing cost to councils. It suggests that the central government could do more to help councils deal with the growing threat of climate change.

“[W]e are making decisions about existing assets without knowing our real options; in the face of increasingly frequent and extreme natural hazards, we are hoping rather than planning for the future,” Ellis told the Science and Media Centre.

Meanwhile, Victoria University of Wellington economics of disasters chair professor Ilan Noy highlighted the report’s finding that insurance is not part of the solution.

“At this point, there appear to be expectations that insurance will protect homeowners in at-risk locations indefinitely,” Noy said. “As such, these expectations exacerbate the problem as the risk remains ‘hidden’ until the insurance companies themselves choose to retreat from providing coverage. This gap in expectations may create pressure on the government to socialise this risk (for example, by extending EQC coverage to all natural hazards, including full coverage for flooding).

“This is bound to create even more moral hazard, so these expectations need to be managed now, rather than later. Current reviews of the EQC and the insurance law should take these concerns into consideration and formulate a long-term strategy to deal with these conflicting aims,” Noy added.

Read more: Insurance contract law options paper released

Among the recommendations of the report include the government extending the NZTA’s co-funding role to assist councils facing climate change-related threats, to transport infrastructure, and creating a new agency and resilience fund to work with at-risk councils to redesign – or possibly relocate – wastewater and stormwater infrastructure.

Submissions on the draft report close on August 29. The final report is expected to be released on November 30.