Climate Change Minister James Shaw is backing insurers to raise premiums to discourage New Zealanders from living in areas likely to bear the brunt of climate change, particularly low-lying coastal areas.
The Green Party co-leader also noted such moves could create "panic" among landowners in affected areas, judging by the reaction of Wellington homeowners to the recent threat that insurance could be withdrawn.
"That wasn't true, as I understand it, but the initial reporting certainly created concern – possibly even a moderate sense of panic in the capital," Shaw said, acknowledging that the Wellington example involved seismic risk rather than climate change.
"Evidence from overseas suggests that high insurance premiums and the unavailability of insurance have a much more direct and stronger impact on private decision-making than the uncertainty of if or when extreme events might happen," he said in notes for a speech to an insurance industry summit hosted by Australian insurer IAG in Auckland.
Sea level rise was likely to have "a significant impact on New Zealand as much of our urban development and infrastructure is in coastal areas", Shaw said.
Risks could be managed in some areas to "keep housing stock insurable".
"In others, where there is not a risk but a certainty, insurance withdrawal may be inevitable, and we need to look at how this can be managed."
Shaw indicated that central government may bear some of the inevitable cost of landowners suffering total losses caused by climate change impacts.
"We need to work towards a system that adequately and fairly shares risk across central and local government, private individuals, and the insurance and banking industries".
He also promised the government's long-awaited and now slightly overdue Net Zero Carbon Bill was "close".
"It's taken longer than you or I might have anticipated or wanted, but it's in good shape and on track to still go through the Parliamentary process this year," he said. "But it's got to be legislation that lasts if we're to provide certainty that our emissions will stop consistently rising and start consistently falling."