After 12 years in the role, Tim Grafton (pictured above) is just days away from stepping down as the leader of New Zealand’s peak insurance industry body.
The CEO of the Insurance Council of New Zealand Te Kāhui Inihua o Aotearoa (ICNZ) has made resilience and recovery a key focus during his tenure.
His time at the top has seen New Zealand’s insurance industry deal with impacts from nearly 100 major insured events, including the Canterbury and Kaikoūra earthquakes, major floods, fires, tornadoes and cyclones.
Insurance Business asked Grafton how the approach of the industry’s stakeholders towards resilience and recovery has changed during his time as CEO.
“There has been quite a sharp change in focus but it's not to say that there isn't work to do,” he said. “If I think back 10 or 12 years ago, certainly some local councils had a reasonably cavalier attitude towards consenting development in areas that were plainly high risk and going to be much higher risk in the future.”
Grafton said today, local regional councils that are responsible for the flood catchment areas ensure that flood mitigation is high on their list of priorities.
“There have also been legislative moves to address better decision-making frameworks around natural hazard risks,” he said.
In 2013, the ICNZ developed a 15-point plan, Protecting New Zealand from Natural Hazards, to try and reduce the social and economic impact of natural hazards and guide legislation.
A considerable amount of hazard-related legislation has come into play since then.
The ICNZ has broadly welcomed much of it, including the Local Government Official Information and Meetings Amendment (LGOIMA) that will come into force in 2025. This bill aims to empower councils to share better natural hazard information.
Another recent and very significant piece of legislation, The Natural Hazards Insurance Act 2023, will come into force in July this year. This act replaces the Earthquake Commission Act 1993 and responds to the 2020 report by the public inquiry into the Christchurch earthquakes.
The ICNZ’s submission to the government committee that developed this bill was “pleased to see the introduction of such a comprehensive Bill” but did express some reservations.
“It is positive to see that many learnings from recent natural hazard events have been included in the Bill,” said the ICNZ’s submission. “We remain concerned about the decision not to consult on a final set of detailed proposed changes to the regime.”
However, Grafton said stakeholders in the resilience and recovery space, including the government, now have a “a much sharper focus” on these issues.
“Especially after the major events that we experienced early last year from the Auckland Anniversary floods and Cyclone Gabrielle,” he said.
Across the Tasman, an ongoing government inquiry into insurers’ response to Australia’s 2022 floods has highlighted a key issue that resonates in New Zealand: the problem of local governments approving building developments in high flood risk areas. Stakeholders say this amplifies insurance issues, including claims volumes and the affordability and availability of coverages.
IB asked Grafton if New Zealand has made headway overcoming this.
“It's still an ongoing problem,” he said.
Grafton gave Auckland’s recent experience after Gabrielle and the Anniversary floods as an example.
“Since then, to the end of 2023, Auckland Council consented to something in the order of 1,100 or so properties in flood prone areas,” said Grafton. “So there's a city experiencing two catastrophic events within weeks of each other, costing literally in the low billions of dollars and consenting taking place subsequently after that.”
He said the problem of dealing with developments in new places of high risk still needs to be addressed.
Grafton has raised this issue numerous times over the years.
As he prepares for new horizons, Grafton pointed to some proposed legislation that could be a long-awaited game-changer for reducing the number of high risk developments.
He said late last year the government held consultations on a Proposed National Policy Statement for Natural Hazard Decision Making, which would apply to all “consenting authorities” involved in assessing new residential development applications.
“They would be required to identify those areas of intolerable risk to life, those areas where there is high risk where some form of mitigation or adaptation is required and then other areas when none is required, because they present low risk,” said Grafton. “So we've yet to see where the new government will go on that, but that policy statement would be a flag in the ground to be able to establish a better framework for the future.”
On another positive note, he said governments are now taking more care to compensate and relocate the people whose homes are uninsurable and located in areas that councils identify as of “intolerable risk.”
He said there does seem to be a general recognition that development in very high risk areas should be stopped and mitigated where the risk is high.
However, Grafton suggested that New Zealand’s success or failure dealing with resilience and recovery issues is still a very open question.
“I’ve certainly had some engagement with the new government and I've been encouraged by some of the things that I've heard but the test of anything is in the doing and so, it remains to be seen what will be done,” he said.
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