Rising sea levels are an increasing threat to coastal properties around the country, but who pays when the flooding becomes constant and insurance companies baulk at the cost? By Peter Griffin.
On a sunny day
in Wellington's Ōwhiro Bay in late June, heaters were drying out the carpet at Ewan Pohe's seafront home as he waited for an insurance assessor to arrive.
This was not Pohe's first storm, and it certainly won't be his last. His house sits in the middle of the horseshoe-shaped bay, across the road from a stony beach that looks out towards Antarctica. It was the only one damaged.
"It turned out to be a bit of a non-event; it probably caused a few thousand dollars of damage," says Pohe, who has lived at Ōwhiro Bay since 1988 and sees waves break over the road a few times a year.
The storm was expected to be much worse, more powerful than the April 2020 storm that sent waves crashing through the bottom storey of Pohe's house, causing about $120,000 of damage. One resident was hospitalised after being knocked over by a wave.
It was a wake-up call for local residents and the Wellington City Council. "The place is like a bomb zone after a storm," says Pohe, who has moved between roles in academia and owning small businesses over the years. "But if they had a sea wall here, nothing would have happened."
Stay or go?
A handful of sea walls are what keep the communities of Wellington's southern coast intact. They protect the road, council infrastructure and, indirectly, houses. One wall ends about 200m from Pohe's house. He wants it extended to buffer him and his neighbours from the sea. "It's relatively minor compared with the other sea walls they've built around Wellington. But for whatever reason, they've forgotten about us," he says.
It's more complicated than that. Wellington City Council and local authorities all over the country face the dilemma of deciding whether to shore up coastal defences or begin the "managed retreat" experts suggest will become inevitable as sea-level rise leads to more damaging storm surges, flooding and coastal erosion.
A report by Victoria University of Wellington researchers, released in December and funded by the Deep South National Science Challenge, showed that our largest cities have about 10,000 houses in one-in-100-year coastal flood zones.
In Wellington, 10cm of sea-level rise would boost the probability of a flood by five times, meaning that once-in-a-century disasters could soon occur every 20 years.
Modelling by the National Institute of Water and Atmospheric Research (Niwa) shows a 1m sea-level rise by 2100 would leave much of the town of Thames under water. Nationwide, 94 schools would be prone to flooding, with Canterbury, Bay of Plenty and Waikato most vulnerable. In the May storm that devastated parts of Canterbury and Otago, much of the North Island east coast was battered by storm-surge erosion and flooding. On the Coromandel Peninsula, a residents group has challenged the district council through the courts to take "meaningful action" in response to climate change.
Most councils, based on guidance from the Ministry for the Environment, are factoring into their planning between 23cm and 37cm of sea-level rise by 2050, and between 46cm and 1.05m by 2100. Climate scientists stress there is major uncertainty about the longer-term projections that will likely worsen the outlook (see sidebar on page 18).
It's not just residents directly on the coast who will be affected. With 450,000 homes around the country located within a kilometre of the coast, flooding and interference with groundwater will affect many more.
It may seem a problem still decades away from confronting us, but all over the country – from Granity on the West Coast to Haumoana in Hawke's Bay, from Waiheke Island to South Dunedin, from Port Waikato to Thames – storm surges and crumbling cliffs are a harbinger of what is to come.
The current reform of the 30-year-old Resource Management Act (RMA) will create new legislation covering climate adaptation. The Climate Change Commission, which last month gave the Government its revised blueprint for reaching net-zero carbon dioxide emissions by the middle of the century, will also turn its attention to the difficult question of adapting to accommodate sea-level rise.
At the moment, local authorities are grappling with questions around coastal planning individually, without a unified framework to inform their decision-making.
The retreat from coastal areas will likely start with insurance companies pulling their cover of the most risky properties.
"The latest research tells us coastal properties will start to lose insurance cover within 10 years," says Tom Logan, a lecturer in civil and natural engineering and a co-director of the research cluster Community and Urban Resilience at the University of Canterbury.
Logan completed his PhD on risk analysis at the University of Michigan and arrived back in New Zealand just before the Covid-19 lockdown. He points to the tight risk parameters the insurance industry works to. "In technical terms, if your property has a 1% chance of coastal damage with today's sea level, then you'll completely lose private insurance once the chance rises to 5%, and that's anticipated to be 25 years away."
He estimates, based on CoreLogic property data and 2019 sea-level rise maps produced by Niwa, that 30,000 properties collectively valued at $17 billion could be uninsurable in the next few decades. "These timelines don't include the latest understanding that we've pushed past some of the ice-shelf tipping points," he says. "Major sea-level rise is on the way."
Once insurance is unavailable to home owners, it can become impossible to maintain a mortgage or secure a new one. Without insurance, homeowners no longer qualify for an Earthquake Commission (EQC) payout for damage caused by a natural hazard such as an earthquake, volcanic eruption or tsunami.
Insurance retreat kicks off a cascading series of events that raises two expensive questions: who covers the newly uninsured and who pays for the physical retreat from the coast that may also be required? For Logan, arriving back in the city where he completed his undergraduate degrees during the Canterbury earthquakes, there's a pressing need to stop building new developments in areas that will be hit by sea-level rise.
In Christchurch, nearly 5000 homes are exposed to coastal flooding, with 1000 of them built after the year 2000. Only Dunedin, where the low-lying areas to the south of the city are particularly vulnerable, has more houses at risk from sea-level rise.
"Even today, local councils are continuing to consent development in these immediately exposed places," says Logan.
He points to a development of 65 houses announced last month for the coastal suburb of New Brighton. ChristchurchNZ, the city's economic-development agency, has signed a deal with property developer DGM Group to develop the 1.5ha site of the old Central New Brighton School. The empty plot is 500m from the coast, down the road from the New Brighton pier, a popular stopping point for locals and visitors to the coast.
"Based on the existing hazard modelling, that is being built on a one-in-100-year flood plain," says Logan. "That implies it could be uninsurable within 25 years."
The greater flood risk would come not from the coast, but from the Avon River. "I wouldn't go there. It's potentially huge upheaval for the people that do move in," says Logan.
DMG Group's Grant MacKinnon, who has been developing sites around the city for about 30 years, has no such concerns. "I've done developments in the central business district that are on the same floodplain," he says. "Singling out a particular suburb on the same floodplain may make for a good headline, but it doesn't mean anything."
His building decisions, he says, adhere to council planning requirements, the building code and the Resource Management Act. Doing anything else would be foolish, he says. "I'm not qualified to step into the details of each component. The body politic makes those decisions."
The New Brighton housing development will take into account the new flood planning levels, says MacKinnon. "The ground on that site is already above average and we will be going 80cm to 1.5m above the ground, so much in fact that there will be storage beneath the units for surfboards, bikes and equipment."
But MacKinnon sees no evidence of people wanting to retreat from the beach nearby. "Some people have an attitude that they're not too worried about 50 years' time, or 100 years' time, or 200 years' time; they're alive on Earth now and they want to enjoy the time at the beach."
MacKinnon adds that the Avon River high tide pushes right up to the edge of Christchurch's central business district.
For Logan, building new homes on floodplains is a problem that could come back to bite the councils that signed off on them in recent years. "Such developments should not only raise the question of whether the council can afford to write them off financially, but whether they believe residents deserve the upheaval and associated mental-health issues that come with living in these at-risk zones."
Belinda Storey coined the term "insurance retreat". The Wellington-based economist and managing director of climate-risk research organisation Climate Sigma co-authored the Victoria University report, which estimated that insurance premiums in Christchurch could jump from the current median of $1600 to $7600 with 13cm of sea-level rise – a highly likely scenario in the next 20 years.
For an idea of how insurance retreat could play out, says Storey, look to the Flockton Basin, one of Christchurch's most flood-prone areas. The already low-lying land slumped further as a result of the earthquakes, leaving it prone to flooding during bouts of heavy rain. But the Government declined to classify Flockton as an earthquake-affected red zone and initially left residents to deal with the flooding themselves.
In one rainy month in 2014 alone, homes were flooded four times, repeatedly forcing residents out. Insurance companies responded by applying a $10,000 excess for flood damage to residents' insurance policies. In some cases, premiums also increased.
By 2015, facing intense public pressure, the Christchurch City Council agreed to spend at least $48 million on widening culverts in Flockton and installing pumps to disperse stormwater, with $2.5 million put aside to buy out seven properties that couldn't be adequately protected. The measures dealt with the worst of the flooding. Insurance companies responded by reverting to their normal policy pricing.
The same story will play out as homes are hit by sea-level rise, says Storey. "I would expect to see some level of partial retreat at a 2 per cent chance of a one-in-100-year storm," she says. "The insurance companies will probably retreat on a street-by-street basis."
As the risk profile of properties increases, the worst-affected homes could be uninsurable for flood and storm damage altogether. This would spell the end of the "all perils" insurance cover that sets New Zealand apart from the rest of the world. That arrangement is thanks to the existence of the EQC, which was set up as the Earthquake and War Damage Commission in 1945, following several destructive earthquakes between 1929 and 1942.
At the time, earthquake insurance was voluntary and few residents had it. The rebuild was slow as owners couldn't afford repairs. The government had put aside funds in anticipation of having to pay for war-related damage and extended the pool to include earthquakes.
In most other countries, you can buy an insurance policy for fire and general damage to a home, but usually have to buy add-on policies for flooding or natural hazards such as earthquakes. So far, EQC's role in reducing insurance companies' risk exposure around natural disasters has seen insurers willing to maintain comprehensive coverage.
"The fact that we've got that bundled insurance is a real advantage," says Storey. "The Christchurch earthquake was one of the biggest insurance payouts in the world, because we had such high insurance coverage."
But with policies renewed on an annual basis, insurers can still raise excess payment amounts or opt out of covering a homeowner with very little notice. "If you are a pensioner and you have to pay $10,000 every time your house is flooded, that's not really sustainable," says Storey.
Other countries have experimented with government-backed insurance schemes covering flooding and extreme weather-related events, but with mixed success.
Sharing the risk
The UK's Flood Re (short for flood re-insurance) system, introduced in 2016, sees all home-insurance policyholders across the country pay about £10 a year on top of their premium to contribute towards subsidising the cost of insurance cover in flood-prone regions of the country. The government agreed to guarantee Flood Re if there's a shortfall in funds to cover flood-hit properties, an increasingly realistic prospect as more frequent flooding events are anticipated.
The scheme, an answer to escalating premiums after a series of damaging floods in the preceding decade, applies only to houses built before 2009, as a way of discouraging new development in flood-prone regions.
But Flood Re is planned to last only 25 years, by which time the government and local authorities are expected to have measures in place to reduce flooding risk. There's widespread scepticism as to whether that's possible. "It's just not credible," says Storey.
In the US, the federal government stepped in as far back as 1968 with the National Flood Insurance Program (NFIP), offered in conjunction with 60 insurance providers, which now has more than five million policyholders, with about US$1.3 trillion in property covered.
It is designed to keep insurance premiums reasonable for people living in flood-hazard zones. But more frequent flooding events have seen the NFIP increasingly step in to top up the pool available for claims. The federal government cancelled US$16 billion of NFIP debt in 2017. As it stands, the scheme owes the government about US$20 billion.
More fundamentally, it encourages people to stay in flood-prone areas. "There are houses in the US that have been rebuilt 35 times," says Storey. "It locks people into dangerous locations."
The more fundamental answer, she says, is to reduce the underlying risk of sea-level rise by moving homes out of harm's way. Her suggestion, being fleshed out as part of a doctoral thesis she's completing at Victoria University, is called a climate lease scheme.
The idea came to her when she was visiting her mother, who owns a coastal property on the Coromandel Peninsula. "I was sitting on the deck thinking, what is going to happen?"
She looked at how church trusts are increasingly converting their leasehold land to freehold titles, offering tenants the right to buy them. "I thought, what if you could do that in the opposite direction? What if we convert freehold coastal property to leasehold?"
Sell now, leave later
In this case, the owner of a property in a coastal hazard zone would sell some of their property rights in exchange for a lease agreement that allows them to occupy the existing property for a set period of time – based on an estimate of when the property is likely to be uninhabitable as a result of sea-level rise.
A government entity would buy the land, paying a lump sum up front, but not charge an ongoing lease to the occupier. The amount paid to the homeowner would be based on the time they have left to occupy the property and represent a percentage of the current value. For instance, if you had only 20 years left to occupy, you'd get paid a larger portion of its value now than if you had 50 years left.
The scheme, says Storey, should be capped, as EQC insurance payouts are, so that multimillion-dollar coastal properties wouldn't get a full payout. It would also be rolled out over decades, allowing the government to spread the cost and prioritise areas of coastal property. A points system could see areas added to the scheme first, such as low-income communities on or near the coast.
"The government would own the land and, at the end of the lease, it would be restored to natural habitat before it was fully claimed by sea-level rise," says Storey.
The scheme could cost billions, but compared with the status quo of continuing to accumulate risky assets along the coast, it would make sense rolled out over decades, she says. "What we've seen internationally is that it's almost impossible for a democratic government to say no when people get wiped out and lose their house. That's what we face. We can cut out that acute pain if we plan for it now."
Storey is hurrying to complete her research this year so it can help inform discussions around new climate-adaptation policy as part of the RMA reforms.
Another possible way to handle climate retreat, says Tom Logan, is a version of the revolving loan fund being considered in California. According to the state's Legislative Analyst's Office, US$8 billion-$10 billion of existing property in the golden state is expected to be inundated within 30 years, with an additional $6 billion-$10 billion impacted at high tide.
Democratic state senator Ben Allen is trying to pass a bill that would introduce a revolving loan programme that has some parallels with Storey's proposal.
"Such a scheme would involve councils or communities purchasing the vulnerable properties and renting them out in order to pay off that loan, until the property is no longer safe," says Logan. "This is essentially a creative version of a buyout programme."
He isn't backing any particular scheme as the best for New Zealand. "I think we need to have the conversation and be open-minded. It could be a very difficult conversation for a lot of people," he says. "Leaving it in the hands of private insurance companies is unlikely to result in the best solution."
It's only fair
The New Zealand Insurance Council, which represents the country's general insurers, is clear on its position regarding sea-level rise. "Insurers will not cover sea-level rise specifically, because there's nothing unforeseen or sudden about it," says chief executive Tim Grafton. "If you have a house that's sitting 5m away from the mean high-tide level today, but only 30cm above it, it's absolutely certain that sometime over the next several decades the sea will arrive at the doorstep and cause damage to that property."
The risks faced in the intervening decades, including flood damage and storm surges, are insurable. But insurers, Grafton says, will respond to the level of risk with changes to their policies. "It played out in double-quick time in the Flockton Basin," he admits. "You might see flood becoming an optional extra, maintaining fire insurance and other damage to property in a standard policy. That is a fair and also a financially sustainable way of being able to keep on underwriting property."
Insurance retreat has so far only hit tiny pockets of the country, where houses face immediate threat of inundation or falling into the sea. There are numerous scenarios for how things might play out for other coastal dwellers in the coming decades, says Grafton.
It will depend on the extent to which councils build sea walls and flooding defences. Holding back the water is potentially a more challenging and expensive task to address than in Flockton.
Grafton sees some scope for a government-backed scheme to help shoulder insurance risk while a managed retreat is undertaken. "It might signal to people that in 20 years' time, there is going to be no support, either from the state or affordable private insurance. There would need to be some legislation to assist that."
Back to the wall
Back in Ōwhiro Bay, Ewan Pohe hasn't seen any sign of his insurance company, Vero, backing away from insuring his home. "If Vero didn't insure Ōwhiro Bay, they wouldn't ensure Breaker Bay, Lyall Bay and Island Bay on the same basis," he says.
He believes the sea wall near his property will be extended eventually. He just worries that it will take "something really bad to happen" during another storm to spur the council into action.
But not everyone in Ōwhiro Bay wants the sea wall extended. Residents, some of whom are reasonably protected by rock formations and don't want their view spoiled, have instead been pushing for the beach to be graded.
They scored a win last week as the council agreed to dig out a natural ramp on the beach made up of sand and shingle that serves to neatly deposit water on to the road.
"Removing sand is not a silver bullet," says Mike Mendonça, chief resilience officer at Wellington City Council. "The sea is mighty on the south coast. It could throw up all that shingle and sand in a matter of minutes."
And the council's policy is that sea walls are there to protect infrastructure rather than houses.
A project under way up the coast at the small seaside village of Mākara could point the way forward. In 2018, many of the 50 properties there were flooded when a storm surge swept in at high tide. Mākara, a magnet for beachgoers at weekends and tucked away just minutes from the busy suburbia of Karori, faces an inundation threat on three sides as it borders an estuary as well as the sea.
The Mākara Beach Project sought to come up with a plan to protect the settlement over the next 100 years. Mendonça is careful to describe it as a "pilot" scheme. "We were really worried that we were going to set a precedent for other communities," he admits.
In numerous meetings over the course of six months, a citizen-led working group considered the options, based on advice from Niwa and a coastal engineer. "We talked to the community about who would pay for it, and that's where things started to get a bit tricky," says Mendonça.
The short-term recommendation was to build a bund – a mound of shingle backed by a fence – along the beach, so the sea water can escape.
In the council's long-term plan, adopted two weeks ago, there's $585,000 earmarked in the 2022-23 financial year for constructing the bund and undertaking civil works. But the medium- to long-term solutions to protect Mākara call for sea walls along both the beach and the river bank. Those would cost significantly more. "To be honest, we never really landed the response to 'who pays?', and 'who gets to decide?'" says Mendonça.
As with many council officials around the country, he is waiting for overarching guidelines and accompanying legislation to steer local decision-making on coastal adaptation.
For Ōwhiro Bay, there's no "concrete commitment" for a sea-wall extension at this point. "We'll try to do our best by the community, without compromising other parts of the community," Mendonça says.
Regardless, Pohe isn't going anywhere. "I knew what it was like, I came here in full knowledge," he says. "I love diving and fishing; I was willing to accept the risk. I'm not stupid, but in the scheme of things, this is a problem that is easily solved."
Don't lump Ōwhiro Bay in with Granity, Haumoana or even Mākara, he says. "We are not in an isolated rural area with a small council with no money.
"We are not far from the centre of the capital and there are plenty of sea walls around our coastline already. As a ratepayer, I see it as a matter of fairness."
"The real story"
The Arctic paints a grim picture, with the melting of its sea ice accelerating at an alarming level.
The best-case scenario for New Zealand is a 50cm sea-level rise by the end of the century if the Paris Agreement global temperature-rise target of 2°C is met, says Victoria University of Wellington climate scientist Tim Naish. The worst-case scenario, if we fail horribly to curb emissions, is a 1-1.2m sea-level rise. But he says either scenario may turn out to be a conservative estimate.
Naish is co-leader of NZ SeaRise, a $7.1 million, five-year initiative to improve sea-level-rise predictions. It will inform the Ministry for the Environment's coast hazards guidance that local authorities throughout the country base their planning decisions on.
The project will soon produce site-specific projections for the entire New Zealand coastline at 2km spacings and identifying the challenges we face. The projections will include data from the Intergovernmental Panel on Climate Change's (IPCC's) pending Sixth Assessment Report.
The picture is reasonably clear out to about 2060. By mid-century, we will most likely have had 20-30cm of sea-level rise. "That's pretty much baked in," says Naish. Beyond 2060, the rate of the increase depends on our ability to curb emissions and the rate at which parts of Antarctica, the largest mass of ice on Earth, melts into the ocean.
"The IPCC is saying that if West Antarctica and parts of East Antarctica change rapidly, all bets are off. You could end up with 40-50cm more sea-level rise just from Antarctica alone by the end of the century."
But the new IPCC report is unlikely to dramatically change its outlook for Antarctica, says Naish. "They've chosen a methodology to do sea-level rise projections that leave out some of those higher-end predictions in recent papers about the Antarctic ice sheet. I think it's obscuring the real story."
The story is complicated by the uneven rate of change across the continent as the planet's climate warms.
We know relatively more about ice loss in the Arctic and from the Greenland ice sheet, which is currently losing mass at around twice the rate of its Antarctic equivalent. The Arctic paints a grim picture, with the melting of its sea ice accelerating at an alarming level. But because the sea ice already sits on the water, its melting doesn't contribute directly to sea-level rise. But Arctic melting encourages warming, because without ice cover, the ocean absorbs more of the sun's energy, accelerating ice melt further.
Melting ice sheets – a mass of glacial land ice extending more than 50,000 square kilometres – now contribute 700% more to sea-level rise than they did two decades ago and are the main driver of sea-level rise, according to the IPCC.
As a result of ocean dynamics and the way ice sheets interact with gravity, sea-level rise is uneven and is not necessarily worse where the melting occurs. In fact, melting in Greenland causes a drop in the sea level around the ice sheet. The local drop is then balanced by a rise in sea level on the other side of the Earth.
Greenland's rate of melting is already factored in, but Antarctica's is more uncertain, which resulted in the IPCC in its last report factoring in an extra 10cm of sea-level rise in its worst-case scenario for 2100 (61cm -1.1m).
Naish admits he is nervous about how the NZ SeaRise projections will be received when they are released. Part of that is down to another, less-well-known factor that could exacerbate the problem of sea-level rise.
The research will factor in the level of vertical land movement around New Zealand. Independent of earthquakes, parts of the country are gradually rising and parts are falling. The lower North Island is subsiding at about 4mm a year. "So, as a result of that alone, you may need to factor in another 30cm of sea-level rise by 2100," says Naish.
Rising sea levels could raise the water table, which is shallow in parts of the country such as south Dunedin, worsening flooding and forcing councils to consider pumping schemes to remove water. The dodgy stormwater infrastructure in some places doesn't help.
"The intrusion of salt water into the groundwater also has big implications, particularly for a place such as Hawke's Bay, because that's not good for horticulture," says Naish.
For major new developments, he says, councils are generally erring on the side of caution, not allowing any below 2m above sea level. "It depends a lot on your tolerance for risk. If you are building major infrastructure such as airports, roads, bridges and nuclear power stations and you have the option, you'd want to go higher."
The real dilemma is around existing low-lying infrastructure that will become more vulnerable over time. "At least we have one thing in our favour," says Naish. "Unlike in an earthquake, we do have some time to plan for it."
State compensation for the effects of rising sea levels is a thorny topic.
The Government's pending help package to mitigate the losses from coastal erosion currently operate along the lines of the movie Fight Club: the first rule is that no one can talk about it.
Legislation will be introduced, if not necessarily passed, this term, helping to relocate, and in some cases compensate, some people and entities likely to lose assets to rising sea levels. But as to how, whom, how much and by what criteria, the Government is necessarily coy.
As Minister for Climate Change James Shaw has pointed out, anything he says about who might be entitled to what sort of help is apt to accelerate poor choices, or in other ways unhelpfully aggravate what is already a complex problem.
Everyone who owns or rents coastal property or houses on reclaimed wetland, for whom even a few centimetres of sea-level rise could be catastrophic, wants to know if they're in the Government-funded fight-back "club", and what the "grandparenting", or cut-off point, will be for when an affected property has been built or bought. It's not just houses and businesses at risk, but public assets. A still-incomplete stocktake by local government has estimated $14 billion worth of roads, sea walls, bridges and other council assets are at risk in coming years.
Westpac has estimated 2.3 per cent of its residential mortgage portfolio is on erosion-prone assets.
A mix of policies is in contemplation for the promised Climate Change Adaptation Act – part of the Resource Management Act reform – including the possibility of an Earthquake Commission-like funding/insurance entity dedicated to managed retreat, mitigation and compensation. It's likely the guidelines the Ministry for the Environment issued last term, showing the areas most prone to erosion or chronic new flooding, will become mandatory, meaning no more development will be able to take place on them. That classification will also be mandatory to include on every property's Land Information Memorandum (LIM) report.
But the ticklish question is where the Government will draw the line in deciding which existing properties and assets get state compensation or relocation assistance and which will be left to fend for themselves. A special complication is that because the no-build guidelines have been non-binding, councils have continued to consent to some builds in doomed areas and can continue until the law changes. The go-aheads have been subject to litigation, further clouding buyers' and owners' options.
All new-builds are politically supercharged because of the national housing shortage and pressure from central Government on councils to accelerate development.
A further thorny area is Canterbury, where some post-quake rebuild developments are on land now classified as "at risk" – effectively on unanticipated new "red zones."
Another political imponderable is whether holiday or secondary homes in coastal districts, more likely to be owned by better-off householders, should receive any mitigation help.
Though the doom zoning affects high- and low-decile districts alike, equity issues will be hard to navigate.
- Jane Clifton