New Zealanders have short memories when it comes to major flood events, an insurance conference has been told. Photo: RNZ
As insurers move towards individual risk ratings for properties, industry leaders have warned that a growing number of homes could be left without insurance.
If a growing number of homes became difficult or impossible to insure, that could cause their value to plummet - creating a problem for the whole economy, industry members were told.
ANZ chief risk officer Ben Kelleher told the recent Insurance Council conference that New Zealanders had short memories when it came to major flood events.
He cited a longitudinal study showing prices drop when a major flood hits an area, then return to their former levels within about two years.
"What we lack is transparency of information, so any party going into a transaction would ideally have the same base level of information. If I'm going to buy a house in this location, what are its natural hazard risks," he said.
"Right now we don't have that and that creates winners and losers."
While potential buyers might have short memories, insurers are acutely attuned to the rising risks from extreme weather and sea level rise - and they were increasingly pricing those risks into their home insurance policies.
Insurance leaders at the conference called for greater information-sharing between councils, central government, scientists and insurance companies to raise awareness of the hazards.
IAG chief executive Amanda Whiting said every property in the country could have its own hazard rating.
"It is actually having a rating, a risk factor if you like, on every property in New Zealand so we can actually start to work through, how do we know where the high risk-rated properties are and what are we doing about those," she said.
Insurers could do their part by speaking out from the outset, when a proposed housing development was going to be uninsurable, she said.
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Tower Insurance chair Michael Stiassny said it was past time for central government to step in and prevent more building in the wrong places.
The people who ended up living in uninsurable properties in flood plains would be those least able to afford to take a financial hit, he said.
"The lower end of the market unfortunately is going to be taken to the cleaners by the developer already with the council in tow."
Developers would likely come up with a way to appease council planners' concerns, he suggested: "Some sort of mechanism that provides comfort, albeit I don't think it will be real. And we will still be sitting there saying, 'We're not going to do anything,' - no bank, no insurance - but it will still happen."
As well as preventing "dumb" developments, industry leaders said the country needed a clear plan for existing homes in high-risk areas.
Although publishing a property's risk profile is good for potential buyers, it has serious implications for the current owner.
When councils such as Kapiti Coast's tried to put risk warnings on property files, they were beaten back by lawsuits.
Successive governments have considered introducing measures, including making it harder to build in flood zones, improving risk information, and setting out what happens when an uninsured property floods - or when it's time to abandon land.
But no legislation has yet made it to Parliament.
Former Climate Change Minister James Shaw told the conference it had been over a decade of talking.
"The agencies responsible for developing this framework have been going around in circles for years and years and years," he said.
Although Shaw admitted the policy process had moved too slowly under his watch, he said governments were naturally cautious about confronting climate risk, because it affected house prices.
"Our economy is largely founded on the notion of permanently rising house prices... so anything we do that places any portion of that at risk is a problem for the current homeowner but also a problem for the broader economy," he said.
Current Climate Change Minister Simon Watts told the conference he would have legislation ready by the end of the year that would address adapting to climate change, but might not cover all the issues.
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