Sea advances, insurance retreats

The minimum likely extent of the problem has been calculated by a team of Te Herenga Waka—Victoria University of Wellington researchers funded by the Deep South National Science Challenge.

Led by School of Economics and Finance PhD student Belinda Storey, the team comprises disaster economics researcher Sally Owen (Te Rarawa ki Hokianga, Ngāpuhi), Chair in the Ecnomics of Disasters and Climate Change, Professor Ilan Noy, and NIWA hydrologist Dr Christian Zammit.

They have quantified what sea-level rise means for the estimated coastal inundation component of insurance premiums for at least 10,000 homes in what is currently a one-in-100 year coastal flood zone.

Nationally there are more than 450,000 houses within one kilometre of the coast.

As developers continue to build on the coast, and as sea levels rise, insurance for those properties becomes riskier for insurers, who are forecast to soon choose not to renew or offer future policies on flood-prone coastal homes.

Of course, not all New Zealand homes in that flood zone are multi-million dollar properties.

The researchers found that, for Wellington, as little as 10cm of sea-level rise could increase the coastal flood probability of what was a one-in-100 year event to a one-in-20 year event.

In the capital, the owners of 1740 homes in the current coastal flood zone could be hit with a hike in premiums from $1800 to $8700, with a 12cm sea-level rise.

For Dunedin, premiums on 3100 homes could increase from $1600 to $7600 or $7900, given 13cm or 14cm of sea-level rise respectively, while in Christchurch premiums on 4850 homes could also lift from $1600 to $7600 with 13cm of sea-level rise.

Auckland has 540 homes in that coastal flood zone, where owners can expect premiums to go up from about $2000 to $10,000 with 15cm of sea-level rise.

This “Insurance Retreat” research shows a relatively small increase in sea-level rise will likely cause at least partial insurance retreat for the vast majority of these properties within only 15 years.

The researchers expect particular hazards may be dropped first. It is possible people may still have insurance for flooding caused by excessive rain, but not insurance for damage caused by a coastal storm surge.

“In some cases it may be difficult to identify a single cause of a flooding event—for example if rainwater cannot drain because of a storm surge—which could result in litigation between policy holders and insurers. After insurance is unbundled, we expect properties to quickly lose insurance for climate-related hazards,” the authors say.

After experiencing partial insurance retreat in the next 15 years, the researchers estimate that by 2050 it is likely insurance cover for the vast majority of homes in the coastal flood zones will not be able to be renewed.

The research also highlights it is the increasing “exposure” to the hazard that is the problem.

“With coastal development having continued apace, it’s not just the climate but our societies’ building choices that are putting us at risk,” they say.

The researchers used a case study of Tauranga, where extra-tropical cyclone Giselle made landfall in April 1968 (the Wāhine Storm) to demonstrate that, even when aware of the risk, homes were still being built in coastal flood‐prone areas.

They suggest that responses to sea-level rise insurance retreat should attempt to eliminate the underlying risk by moving homes out of harm’s way.

Belinda, who also runs Climate Sigma, says a common response to the increasing risk is to “harden” the coasts to defend property from inundation.

“However, engineering solutions like sea walls, stop banks and levees will only delay damage at best and are often problematic, as they can encourage intensification in hazardous locations.”

Sally, who used the University’s Rāpoi computer network for the geospatial processing in the project, says extreme rainfall from the changing climate will affect far more properties than those coastal homes highlighted in this research.

“Another big question for me next is what about non-residential property? Next year, with Ilan Noy and Dr Shaun Awatere of Manaaki Whenua, I’ll be looking into the climate-risk ramifications for other important community assets, such as marae.”