Over the coming years, thousands of New Zealand families are going to get some seriously bad news about climate change's impact on the value of their properties.

The only question: who will get to deliver it?

It might be insurers, reducing the extent and increasing the cost of cover until declining cover altogether. As they like to say, they cover risks, not certainties.

It might be potential buyers pulling out because they couldn't get a bank to lend on the security of the property.

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It might be the local council drawing lines on a map or attaching some warning to land information memoranda and talking of managed retreat.

Or the message might be delivered by Mother Nature herself. Having been flooded out myself once, along with a seventh of Invercargill, I can attest that it is not fun, even as a one-off. If it kept happening to you it would be soul-destroying.

Research commissioned by the Parliamentary Commissioner for the Environment pointed out that even modest rises in sea level will greatly increase the frequency of major events.

Once sea level has risen 30cm – which is quite possible by 2065 — what is a once-in-100-year event could become an annual event in Christchurch and Wellington.

The problem of too much water in a built-up area — whether it has come in from the sea or is making its way to the sea through undesirable routes after a storm — is only one of a range of adverse effects of climate change to which we will have to adapt.

Others include increased risk of drought or forest fires, or changing the geographical range of pests and diseases.

The Reserve Bank tells us 2017 was one of the most costly years on record for weather-related claims.

Reflecting on housing, insurance and climate adaptation in a paper last year, economists at the Motu think tank and Victoria University of Wellington say that in an ideal world, home buyers would take science-based risk into account when purchasing, affecting what they buy and how much they pay.

Developers would take risk into account in siting and designing developments.

Insurers would pool the remaining risk across individuals. And councils would commit credibly to an adaptive decision-making process for land use and building decisions.

In the actual world, the granular information needed about climate risks and how they vary over time is scarce. And even with good information, people often make poor decisions when operating under uncertainty.

The status quo, in short, is one of muddle, myopia and moral hazard.

Sorting that out will require hard decisions about two kinds of risk.

One is what investments or other proactive policy measures to undertake, in order to reduce the physical risk of climate-related damage.

Where would upgrading drainage or earthworks do the trick, or where would progressive depopulation be required, for example.

The other is how to fairly and efficiently spread the financial risk of compensating for the damage that cannot be avoided.

One of the recommendations of the Climate Change Adaptation Technical Working Group, which reported to the Government last week, is to set up a kind of brains trust to inquire into who should bear the costs of climate change adaptation and how it could be funded.

It says that would include how these costs could be equitably shared across the public and private sectors.

How far should the Crown's responsibility extend to address situations where it is neither fair nor realistic to expect businesses or households to act?

Those are daunting issues. But framing the problem in that way ignores a crucial third player — one which sits between households and businesses on one side, and central and local government on the other.

That is, of course, the insurance industry.

The decisions insurers make about what climate-related risks they are prepared to cover and on what terms will determine how much risk individual families and firms have to bear on one side, and what risks might have to be socialised on the other.

Given the timidity and torpor politicians tend to display when confronted with long-term challenges, the danger is that insurers will end up forcing the pace of change in haphazard, localised ways, triggering ad hoc responses from politicians which are incoherent and heavy with moral hazard.

The working group's earlier stocktake report hints at concerns in the industry that if one insurer (especially a major one) were to openly pull out of covering some area, others would swiftly follow suit. And that would have flow-on effects on the security of loans.

Asked about this last week, Climate Change Minister James Shaw said, "my sense is that the insurance industry is taking a very responsible line on that and working very closely with us.

Some of the early signals of their thinking have been very carefully placed into the market and managed pretty well and that points to the level of co-ordination we need between central government and local government and the insurance industry itself."

The starting point is good. By international standards a very high proportion of New Zealand properties are insured and the range of hazards covered is wide.

Both those things could change, however. Insurers are private enterprises, after all, and they have to satisfy their regulator that their capital-to-liabilities ratios are adequate.

Insurance contracts are typically annual, which makes them more nimble than others with a stake in this.

The signals they send as climate risks mount are liable to be graduated.

First, a higher excess perhaps, then higher premiums or a reduction in the sum insured and only last, declining cover altogether.

But one risk for banks, especially in these times of eye-watering house price-to-income ratios, is that mounting insurance costs could affect a borrower's ability to service a loan, or lead the borrower to trade off the extent of cover.

Ultimately, as the Motu paper says, "Evidence from international markets suggest that when a risk becomes uneconomic insurers can decide that an area is 'uninsurable' and withdraw insurance altogether.

As hazards escalate property developers and existing home owners may seek to block the transmission of information to potential home buyers."

Caveat emptor. Buyer beware.