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The Insurance Council says the Government and local authorities need to look at ways to decrease the risk of floods in some areas in the wake of climate change.
Chief executive Chris Ryan made the comments following two days of devastation in the top of the North Island
during which some Northland towns such as Kaeo flooded for the second time this year.
His comments echo those of Prime Minister Helen Clark, who said there would be problems with small townships established on the banks of rivers.
"In an age when there is human impact on climate change, are we going to be able to sustain those communities? There are questions to be asked," she told Radio New Zealand yesterday. "The problem in some of our small townships is that with floodwaters going through fairly regularly, people can't be insured."
Helen Clark said the situation would have an impact on how land was zoned for development.
Mr Ryan said the Prime Minister was brave but right to look at such issues.
"The insurance industry paid out $800 million in climate-related damages last year, and with climate change it's likely to get worse unless changes are made," he said. "It doesn't mean towns have to be moved, but local authorities and Government will have to carefully consider how they future-proof their communities."
Mr Ryan said communities such as Kaeo could well face rises in insurance premiums for flood cover unless some changes were made. "The options for places like this are for premiums to go up, to ask people to raise the level of their properties, to put something like a flood wall up, or insurers to say they won't cover for floods but they will for fire and earthquakes."
Councils and the Government needed to consider changes to the surrounding environment to make communities less at risk of heavy rain causing floods.
"Flood plans which better direct the water away from the towns would seem a good idea," Mr Ryan said. "It may be that the cost of implementing flood plans will fall on ratepayers, but that may be a cost they have to bear if they want their properties to be safe and insurable against floods."
Governments and local authorities needed to work with insurers to find the best way forward for communities most heavily affected by climate change, Mr Ryan said.
However, he said, climate change didn't necessarily mean premiums would go up for all New Zealanders.
Far North Mayor Yvonne Sharp said local bodies should be given greater powers to prevent people from putting up new buildings in flood-prone areas.
She said it was more practical for councils to be given greater powers under the Resource Management Act than it was for an existing town such as Kaeo to relocate.
Kaeo BP owner Ross Telfer said the suggestion of relocating the town was "quite ludicrous".
"Where would you relocate, for a kick-off? There would be nowhere suitable to go."
- NZPA
