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Insurance, housing and climate adaptation: current knowledge and future research

Deep South Dialogue Report, 2017

Climate change will inevitably threaten New Zealand’s coastal housing, but the exact nature of that threat will depend on the insurance options available.

This report discusses how insurance will adapt to a changing climate. New Zealand’s current insurance institutions are surveyed; these are sufficiently unusual to limit the applicability of the international literature. Issues with the provision of climate-sensitive insurance – particularly with its pricing – are discussed, as are relationships between insurance markets and financial markets. Possible policy responses are suggested.

This paper was written after and informed by a facilitated dialogue, held at Motu Economic and Public Policy Research.

The Dialogue was held to identify high-priority research questions, which both address the unknowns identified in this paper and are tractable to high-quality research:

  1. Where do sea-level rise risks currently fall across the different parties (homeowners, government, and private insurers)? How should this exposure to risk be allocated to contribute to a fair and sustainable adaptation to sea-level rise?
  2. What policy options are available to local, regional and national government when a tipping point of uninsurability is reached?
  3. What would those tipping points be? What would be the economic implications of a maximum probable weather event in Auckland?
  4. What is the relationship between house prices, climate change related hazards, and insurability?
  5. What financial instruments or institutional arrangements can be developed to mitigate climate change risk and insure the functioning of housing markets?
  6. How can we better inform coastal property owners’ decision-making with respect to climate change?

Related research

Following this Dialogue, the following research projects were funded: