Thousands of New Zealand homes could become uninsurable by private companies in the face of climate change, researchers say.
But the extent to which our coastal housing was threatened would depend on insurance options available to homeowners.
The authors of the Insurance, Housing and Climate Adaptation report - commissioned by the Deep South National Science Challenge - investigates the different challenges climate change will present to homeowners, insurers and Government.
It also points to critical areas where more research is needed.
A collaboration between Motu Economic and Public Policy Research, Victoria University of Wellington and the challenge, the report highlights issues New Zealand may face as it grapples with the risks climate change poses for coastal housing, especially through sea-level rise.
Across the country - in regions with high-quality data - there are over 43,000 homes within 1.5m of the present average spring high tide, and nearly 9000 within 50cm.
According to the most recent Intergovernmental Panel on Climate Change report, global average sea levels are likely to rise between 28cm and 98cm by 2100.
While geomorphological science could provide estimates of the damage from coastal-storm inundation in select locations in New Zealand, measurements were less accurate when it came to coastal erosion and sedimentation in harbours and estuaries, given the complex processes and sediment sources involved.
Further, accurate estimates of future coastal hazards were limited by deep uncertainties around polar ice sheet response and future global emission pathways, the high cost of up-to-date high-resolution land elevation and asset datasets, and the limited precision of actuarial models for extreme events estimated using little reliable data.
Nevertheless, most climate models predicted that while the number of tropical cyclones will reduce slightly, the proportion of tropical cyclones that reached Category 4 and 5 would increase and the path of tropical cyclones would move poleward.
This could increase the probability that a tropical cyclone undergoes an extratropical transition that resulted in a large storm surge in Auckland.
One of the report's authors, Professor Ilan Noy, said the aim was to highlight the need for "a lot more research on this issue of sea-level rise and insurance of residential properties".
Noy, who holds the Chair in the Economics of Disasters at Victoria University of Wellington, said at some unknown point in the future, there would be thousands of properties no longer insurable by private insurance companies.
This could happen gradually, or suddenly in response to an event in New Zealand or overseas, and the number or location or properties are unknown.
"Some precedents from here and abroad suggest the Government may step into this market to replace the private insurers, but we don't know whether and how that will happen.
"We also don't know how the costs will be allocated across the different levels of government."
Alternatively, if the Government did not intervene, the cost was likely to be borne mostly by the owners whose properties will not be marketable anymore, she said, though some costs might still be borne by Crown institutions like the EQC.
University of Otago Honorary Research Fellow Dr Jim Salinger said the topic was important, considering 12 out of the 15 largest towns in New Zealand are at or near sea level, "thus at high risk from sea level rise".
"Major decisions are required in coming years on whether central and/or local government protect, adapt or retreat from areas prone to sea level rise and flooding," he said.
"The costs of protection are phenomenal. A national strategy is required because of the land and housing at risk from storms and flooding."
Dr Judy Lawrence, co-chair of the Government's Climate Change Adaptation Technical Advisory Working Group, said the report put a "spotlight on the role that insurance and the finance sectors might play in the ongoing response to climate change impacts".
"They can either transfer risk to the Crown or private property owners, or work in tandem to reduce the exposure to risk and deal with the legacy effects of past decisions at the coast and on floodplains."
But the report pointed to many complicating factors.
For instance, climate change could make the calculation of actuarially precise insurance premiums more difficult both because climate change increased the categories of risks which may require insurance, and because the hazard's frequency and intensity were changing over time, rendering historical data less relevant.
The report stated the transitions necessitated by climate change would be difficult, and managing them would require social and financial responses that would generally be perceived as fair by the wider New Zealand community.
"Rules to preserve efficient decision-making must be credible and enforceable," the report stated.
"Given the overlap between local and central government, that credibility will require the national coordination of local conversations."
The report laid out six high-priority research questions, including how sea level rise risks currently fall across different parties, what policy options are available for when the tipping point of uninsurability is reached and what those tipping points would be.
New Zealand and climate change
• Under present projections, the sea level around New Zealand is expected to rise between 50cm and 100cm this century, while temperatures could also increase by several degrees by 2100.
• Climate change would bring more floods (about two-thirds of Kiwis live in areas prone to flooding); make our freshwater problems worse and put more pressure on rivers and lakes; acidify our oceans; put even more species at risk and bring problems from the rest of the world.
• Climate change is also expected to result in more large storms compounding the effects of sea level rise.
• New Zealand, which reported a 23 per cent increase in greenhouse gas emissions between 1990 and 2014, has pledged to slash its greenhouse gas emissions by 30 per cent from 2005 levels and 11 per cent from 1990 levels by 2030.