Rising sea levels will make low-lying beachfront properties far harder, and possibly prohibitively expensive, to insure, writes Donna McIntyre.

New Zealanders pay a premium for properties close to the water. That privilege may also add a premium to their insurance policies.

It's a sombre thought that most Kiwis alive today will witness sea levels rising by at least 30cm.

"That is regardless of what action is taken globally on greenhouse gas emissions," says Insurance Council chief executive Tim Grafton. "As more people live in our largest cities, more lives and assets concentrate in disaster-prone areas.

"By 2050, about one million older New Zealanders will be living in areas vulnerable to severe flooding, coastal storm surges, land slips and wind storms.

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"Climate change will increase the risk of flooding in parts of the country and drought in other areas. Coastal areas will be more vulnerable as sea levels rise and we can expect more severe windstorms in the west."

Based on data going back to 1900, on average, New Zealand faces annual costs of $1.6 billion (just under 1 per cent of GDP) from natural disasters.

The Parliamentary Commissioner for the Environment's 2014 report on climate change and rising sea levels states there is overwhelming evidence the sea level will continue to rise and lead to increased flooding, damage and social disruption.

The Environment Commissioner plans to release a report later this year pinpointing which towns and cities will be affected. Insurance companies, too, are monitoring climate changes.

Gary Young, CEO of the Insurance Brokers Association of New Zealand, believes climate change will lead to changes in risk profiles and rates.

"Premiums will respond to the change in risk. If the risk of flooding increases, the premium is likely to as well, depending on the degree of change.

"There may also be changes to excess levels so that the insured client takes on more of the risk.

"In extreme examples the client could be forced to retain all the risk if the insurer considers the risk of loss is inevitable. This type of insurance is for the unexpected loss, not the inevitable."

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By 2050, about one million older New Zealanders will be living in areas vulnerable to severe flooding, coastal storm surges, land slips and wind storms.

Tim Grafton, Insurance Council chief executive.
Tim Grafton, Insurance Council chief executive.

"We have seen isolated examples in New Zealand where insurers have withdrawn cover, flooding in Queenstown near the lake being one.

"What tends to happen in this type of situation is that preventative measures are required before cover is re-instated."

He points to Australia where the insurance industry has encouraged national and local government to introduce flood-mitigation measures such as stopbanks in flood-prone areas.

"Where this has been undertaken the insurance cover has been reinstated, with lower premiums reflecting the reduced risk."

Craig Dowling, spokesman for IAG New Zealand, says insurers monitor the science around the impact of changing climatic conditions on people and property, seeking to understand its implications.

"We do this in a variety of ways but primarily by engaging with other organisations with shared interest in understanding the risk -- such as central and local government and their agencies."

However, he says, with affordability of, and access to, insurance being important considerations for the insured and the insurer, IAG is careful not to get ahead of itself, or of science.

"The implication for customers is that they should give appropriate attention to current and potential future risk when they make decisions about homes and property they are financially committing to.

"Be part of conversations and utilise all the information that is available to consider that risk.

"Just as someone may be prepared to pay higher rates, they may be prepared to pay higher insurance premiums or even accept exclusions for certain events in order to live in certain locations, but going in eyes wide open to that possibility in the future would make sense."

The Insurance Council has compiled a 15-point plan aimed at reducing the social and economic impact of natural hazards in New Zealand, with the goal of keeping insurance available and affordable.

Recommendations include better central co-ordination of national responses to natural hazard management, amending the Resource Management Act to include the management of natural hazards, and listing all natural hazards on property Land Information Memorandum (LIM) reports.

Grafton says people must be able to access information about the risks they face, particularly where they decide to invest and live.

"Some regional councils are leading the way, providing granular information online for anyone to see for free."

But property owners need to remember insurance is not a substitute for risk management, nor does it reduce risk.

"Public education is essential, but so is making the right choice not to live in high-risk areas or when building seeking to future-proof.

"If public attitudes change, then higher-risk properties should be less desirable and will lose their market value.

"We cannot control the forces of nature, but we can reduce their impact significantly by building New Zealand's capacity to withstand and recover from natural disasters."