More than 10,000 homes could lose insurance by 2050 due to climate change and just 12 centimetres of sea-level rise could make 1-in-100 year flooding five times more likely in Wellington.
Those are the conclusions of a new report for the Deep South National Science Challenge from researchers at ClimateSigma and Victoria University of Wellington. The report estimates the likelihood of insurance companies pulling out from exposed, coastal properties in the coming decades as sea levels continue to rise.
It found that more than 10,000 coastal properties in Auckland, Wellington, Christchurch and Dunedin which currently have a 1 percent Annual Exceedance Probability (AEP) – they are exposed to 1-in-100 year floods – will reach 5 percent AEP (1-in-20 year floods) in less than three decades.
Anecdotal evidence indicates insurers begin to pull out when properties reach a 2 percent AEP threshold (1-in-50 year floods). Termed “partial retreat” by the researchers, this involves transferring risk back to the property holder through caps on coverage, excesses for specific hazards or just excluding specific hazards (like flooding) from insurance altogether.
As properties near the 5 percent AEP threshold and are increasingly threatened with total destruction by flooding and storm surges, insurance companies stop insuring them altogether. However, the researchers note that some insurance companies are even more risk-averse, engaging in partial retreat for properties crossing the 1.33 percent AEP threshold (1-in-75 year floods).
Based on estimates from NIWA about sea-level rise in New Zealand and the average tidal range for the four coastal cities under investigation – where a smaller difference in sea level between high and low tide makes flooding more likely – the researchers concluded that 10,230 properties which currently have a 1 percent AEP will experience full insurance retreat by 2050.
Wellington is the most exposed to this. Some 1,740 coastal properties will hit the 5 percent AEP threshold at just 12 centimetres of sea-level rise – a figure which NIWA predicts could be reached as early as 2040. Just under 5,000 homes in Christchurch will lose their insurance at 13 centimetres of sea-level rise, followed by 3,100 Dunedin properties at 14 centimetres and 540 Auckland houses at 15 centimetres.
In Wellington and Christchurch, meanwhile, partial retreat could begin as early as 2030.
“Many coastal locations face unprecedented disasters spurred by human-made climate change. The homes of Aotearoa New Zealand hug the coast of our long thin islands tightly and this affects the pace of insurance retreat here,” the researchers write.
“Aotearoa New Zealand has relatively small tidal ranges compared to elsewhere in the world. This means only a very modest amount of sea level rise is sufficient to change the probability of a storm surge overtopping previous high-water marks. Further, while climate change is changing our hazards, we are also increasing our exposure to those hazards.”
Building defences like sea walls, stop banks and levees might not be the best response, the researchers caution. This could create a false sense of security, incentivising further development in threatened coastal areas. Moreover, planning for and defending against the increased likelihood of 1-in-100 year events may not take into account the increased chance of even more devastating 1-in-500 year events, which would overwhelm all but the strongest barriers.
“Hardening defences might allow us to maintain insurance temporarily, but it only extends the deadline rather than eliminates it,” the authors write.
They also note that the estimates in the report are likely to be exceeded in real life. More than 450,000 homes in New Zealand lie within one kilometre of the coast and many of these are likely to be threatened by climate change and experience some degree of insurance retreat by the end of the century.
“The analysis in this report is conservative. We expect the true number of homes facing coastal insurance retreat to be higher, and the number on our inland floodplains to be far higher. Our results should be taken as a lower bound.”
