New Zealand’s largest general insurer and one of its biggest domestic underwriters have already begun acting on the risk calculus that the Climate Change Response Amendment Bill is only now starting to address in policy. The bill mandates planning. The market is not waiting.
Climate Change Minister Simon Watts introduced the bill on July 15, 2026, creating for the first time a legal obligation for councils to plan how high-risk communities will adapt to climate change over a minimum 30-year horizon. But Watts confirmed the government has not settled the funding split, telling RNZ that decisions about cost-sharing would be made in the next term of government, and that ministers were “simply not at that point” on who should pay. “The first step is get the plans in place,” he said, acknowledging funding and cost-sharing were among “the most complex and politically charged” questions in the debate.
That deferral has a documented cost trajectory behind it. Under 2025 conditions, total annual inland flooding costs – across private buildings, water infrastructure, and road networks – are already estimated at $471.9 million per year. Research published in July 2026 by Earth Sciences New Zealand, commissioned by the New Zealand Infrastructure Commission, projects those costs rising further: under a high-emissions scenario, annual inland flood damage to infrastructure is estimated to climb from $300 million in 2025 to around $465 million by 2075, while coastal flooding damages are expected to almost double from $165 million to around $325 million per year.
For insurance professionals, the bill’s significance must be read against decisions that are already in effect. In January 2026, AA Insurance halted new home, business, and landlord policies in Westport, RNZ reported. AA Insurance head of underwriting Dee Naidu said the decision reflected “the elevated natural hazard risk of flooding in the area, and that our exposure has reached a level where a pause on new policies is the most responsible step to ensure we can be there for our existing customers when they need us most.” The insurer subsequently paused new policies in a second location – Woodend in North Canterbury – citing seismic risk exposure limits, according to a separate RNZ report.
IAG, New Zealand’s largest general insurer, has taken a parallel approach. IAG NZ chief executive Phil Gibson told the NZ Herald the company was being deliberate about the new business it took on in flood-prone areas. “Let’s stop digging that hole deeper,” he said, adding that IAG did not want to encourage people to invest in hazardous properties that could become uninsurable in the future. IAG has moved to risk-based pricing for flood-exposed properties, with Gibson describing the approach as one that would ultimately benefit low-risk policyholders no longer cross-subsidising high-risk ones.
A key finding from Gallagher Insurance NZ’s April 2026 market analysis was that insurers had shifted from sector-wide risk assessments to individual site-level evaluations, with two otherwise similar businesses able to face significantly different premium terms based solely on location-specific flood, coastal, and weather data.
Local Government New Zealand (LGNZ) president and Gisborne mayor Rehette Stoltz delivered the council perspective directly to the insurance sector at the Insurance Council of New Zealand (ICNZ) annual conference in June. Stoltz told the conference that councils were being asked to carry a national problem on local balance sheets and needed “durable co-funding” from central government. She pointed to Tairāwhiti’s experience of repeated severe weather events since 2017, saying the financial and decision-making burden was too heavy for councils to carry alone.
The evidence from specific councils reinforces that concern. According to RNZ, a Climate Change Commission case study on Westport found that Buller District Council received funding for the planning phase of its adaptation work, but that regulatory general manager Simon Bastion described what followed: “there’s no follow-on – after that you’re on your own.” ICNZ chief executive Kris Faafoi has consistently framed the funding question as a commercial one for the sector. “The biggest challenge now is moving from planning to funded delivery. We need investment in risk reduction so communities are safer and insurance is accessible in the future,” he said.
ICNZ’s proposed funding mechanism – replacing the FENZ levy with a Community Protection Levy – remains unendorsed by the government. Under the proposal, FENZ would move to Crown funding, redirecting $600 to $700 million per year into resilience and risk reduction work. Finance Minister Nicola Willis rejected the proposal at the ICNZ conference, saying a dedicated levy was unnecessary “if you have prudent government investing in infrastructure.”
That position sits against a finding from a 2025 IAG-commissioned Sapere Research report, cited in industry analysis, that since 2010, 97% of government natural hazard spending went to response and recovery, with only 3% directed to risk reduction. Private insurers have absorbed $31 billion of the more than $64 billion in total natural hazard costs since 2010. The 2023 events alone generated more than 118,000 claims totalling around $3.8 billion.
The Climate Change Commission’s 2026 National Climate Change Risk Assessment, published in May, found that climate adaptation in New Zealand continues to be constrained by a lack of national direction and an absence of clear, durable funding arrangements – a finding that predates the bill and that the bill, as introduced, does not fully resolve. The bill has been referred to select committee. A submissions timeline has not yet been confirmed by Parliament.
