The Reserve Bank of New Zealand (RBNZ) placed insurance affordability on its financial stability risk register for the first time in May, warning that insurer retreat from flood-exposed areas and rising premiums could transmit into the banking system. Consumer data released today by IAG New Zealand, which operates the AMI, State and NZI brands, puts the household dimension to that institutional signal. A poll of 1,000 New Zealanders, conducted by Ipsos in May, found 50% of respondents worried they would no longer be able to afford home and contents insurance and 44% feared losing access to it altogether because of climate risk. For the fifth consecutive year, more respondents lacked confidence in New Zealand’s ability to manage climate change than felt confident – 42% to 27%.
The RBNZ’s May 2026 Financial Stability Report found that while insurance coverage of residential property remains high, emerging pressures from affordability, underinsurance, and insurer retreat from flood-exposed areas “indicate financial stability risks may increase.” The central bank identified five transmission channels through which broadening insurance retreat could affect the banking sector. Three relate to property and lending: collateral impairment on uninsured homes, reduced mortgage serviceability in hazard-exposed areas, and the risk of banks informally red-lining areas with high insurance uncertainty. Two relate to systemic confidence: operational and legal exposure from mortgage contracts requiring insurance that banks cannot systematically monitor, and erosion of public trust following high-profile uninsured losses.
New Zealand’s residential insurance penetration sits at around 90%, among the highest in the world, with total sum insured for residential dwellings estimated at $1.5 trillion in 2024/25 and the national average annual buildings premium at approximately $2,900. Against a total stock of approximately 2.1 million private dwellings at March 2026, that penetration rate implies around 210,000 homes without cover. The Natural Hazards Commission’s (NHC) figure of approximately 60,000 uninsured homes represents those it has specifically identified, not the full uninsured population. The RBNZ concluded that “concerns over affordability, climate change, and dependence on global reinsurance mean the situation could change quickly and warrants monitoring.”
The IAG poll found 80% of respondents considered home and contents insurance less affordable than before, and 69% attributed premium increases to the growing frequency and cost of natural disasters. An August 2025 Consumer NZ report, using Stats NZ data, found house insurance premiums had risen 916% since 2000. The share of households cancelling insurance due to cost rose from 7% in 2022 to 17% in 2025.
In February 2026, Cabinet instructed the Council of Financial Regulators to carry out a focused assessment of household insurance affordability alongside an initial Commerce Commission market assessment, with findings expected to be reported to the Minister of Commerce and Consumer Affairs in mid-2026. Consumer NZ’s submission noted that the two dominant trans-Tasman groups – IAG and Suncorp – “appear to be earning higher returns in New Zealand than they do in Australia.” Treasury has similarly noted that general insurers’ profit margins appear higher in New Zealand than in Australia, adding that the pattern “could also indicate weaker competitive pressures in New Zealand.” IAG is one of the two groups named in that assessment.
Phil Gibson, chief executive of AMI, State, and NZI, connected the affordability pressure directly to risk accumulation. “New Zealanders see the link between the growing risk and their insurance. Without meaningful action to reduce that risk, their ability to afford or even obtain insurance will reduce. As a country, from government to individuals, we know we can’t allow that to happen,” Gibson said.
In October 2025, the government released New Zealand’s inaugural National Adaptation Framework (NAF) – the first coordinated national system for managing climate-related natural hazard risk. The framework set out four pillars: risk and information sharing, roles and responsibilities, investment in risk reduction, and cost sharing, driven by 16 actions. For the insurance and lending markets, the commercially relevant signal is that the NAF moves policy toward a beneficiary-pays orientation, clearer council mandates for hazard planning, and a deliberate intent to let markets price risk rather than absorb it through cross-subsidy. Local councils are required to develop 30-year adaptation plans for areas most exposed to flooding and coastal hazards.
The ICNZ described the framework as a necessary first step but said pace was the critical variable. “The government’s National Adaptation Framework is a vital first step. Now it’s time to move the dial from good intentions to real action,” ICNZ chief executive Kris Faafoi said. That position is supported by ICNZ’s own 2026 survey finding that 87% of respondents favoured acting early to protect communities from natural disasters – an independent corroboration of the demand signal in the IAG data.
The Natural Hazards Insurance Act 2023, which came into force on July 1, 2024, replaced the Earthquake Commission Act 1993 and set a primary objective of reducing the impact of natural hazards on people, property, and the community. A Treasury-recommended increase to the NHI levy – from 16 cents to 24 cents per $100 of building cover, which would raise the maximum annual levy per dwelling from $554 to $828 – has been deferred until the CoFR review reports, meaning levy settings and the affordability findings will be considered together.
The IAG poll surfaced a tension underwriters will recognise. Sixty-one percent of respondents supported risk-based premium pricing for higher-risk properties, and 74% accepted they would pay more if they lived in such a location. Yet 74% also said they wanted insurers to keep as many homes covered as possible, and only 20% were willing to subsidise high-risk policyholders. “On balance, New Zealanders want insurers to keep people insured. And that’s what we want also, but this will require much better management of our climate risks,” Gibson said.
The ICNZ’s 2025 Annual Review reported total industry claims of $3.8 billion and noted that global insured losses from natural catastrophes exceeded US$100 billion in 2025. Munich Re data cited in the review found weather disasters accounted for 92% of all 2025 losses and 97% of insured losses globally. ICNZ approved investment in a new industry data platform in December 2025, with implementation beginning in January 2026, to improve information sharing on natural hazard risk across the sector.
Now in its ninth year, the IAG poll series has tracked a steady transfer of public expectation toward central government. In 2018, 25% of respondents held government most responsible for action on climate change. By May 2026, that figure had risen to 58% – more than doubling in eight years of annual measurement. “The challenge we face is not insurmountable and requires a clear strategy and senior political leadership to drive the change needed so that councils, businesses and households can get on and reduce the climate risks they face,” Gibson said. With a general election due later in 2026, ICNZ has signalled it will advocate for cross-party consensus on adaptation, on the basis that the risk environment does not pause between electoral cycles. The sharpest finding for any incoming government is the performance gap: only 21% of respondents rated central government’s current handling of climate change as adequate.
