Friday, July 1, 2022

Provinces hit in record claim year

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A record claim year for insurers has again raised the possibility of relocation and abandonment of settlements in some rural areas due to increasing climate risks.

Insurance Council NZ chief executive Tim Grafton did not believe insurers were likely to walk away from communities more likely to face greater risk of flooding, but they would balance their portfolios across a range of geographic and risk factor areas, to spread their exposure.

A record claim year for insurers has again raised the possibility of relocation and abandonment of settlements in some rural areas due to increasing climate risks.

Latest Insurance Council data highlight that 2021 was a record year for claims, totalling $324 million, an 18% jump in claim value from 2020.

Rural New Zealand was hit particularly hard last year.

The July 19 flooding through the Lower North Island and upper South Island amounted to $140m of claims, the largest flooding event of the year in terms of spread and cost.

The Canterbury flood event a month early on June 1 accounted for $46m of claimed damage.

After the devastating floods that hit Westport last July, and again in its hinterland only weeks ago, the potential to relocate such a town has been mooted.

In July the town’s 4000 residents claimed almost $90m of damages to houses and businesses, with 460 homes left either written off or damaged by floods.

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Another weather event in February had farmers in the town’s hinterland wear the brunt of heavy rain and flooding, with the town narrowly escaping more damage.

Insurance Council NZ chief executive Tim Grafton said decisions around relocating vulnerable small centres like Westport are ones that rest with councils and revolve around issues of legality, time and the mechanics of actually achieving such a move.

“There are many issues buried within such a step that would need clarity before proceeding,” Grafton said.

He did not believe insurers were likely to walk away from communities more likely to face greater risk of flooding anytime soon.

Rather, he said insurers tend to balance their portfolios across a range of geographic and risk factor areas, to spread their exposure.

Nor did he believe there was a tension between insurers wanting to lower exposure to risky parts of the country where further council infrastructure investment such as flood controls could play a role in reducing that risk.

“The issues are challenging and we need good communication. Insurers can provide good data to councils to help make decisions, as they are the only party that is actually pricing risk in these situations. We can show that by doing nothing, this is the loss amount you are exposed to,” he said.

Christchurch city, however, provides a good example of insurers responding to a greater level of risk, and businesses or households having to pay higher premiums.

Post earth-quake, the Flockton Basin in the city sunk lower, increasing flood occurrences through some suburbs.

Their residents faced increases in insurance excess payments and only after $50 million of mitigation by the council did those rates fall, along with premiums.

But Grafton acknowledged a denser city ratepayer base had more opportunity to raise funds than a remote, sparsely populated rural one.

“So, there is an issue there for central government to consider additional funding, and perhaps that needs to be a criteria if the rating base is insufficient,” he said.

Westport faces this very issue, with a regional council proposal in play for $3.5m to be spent on Buller River flood walls and stop banks.

Westport mayor Jamie Cleine said the concept of moving his town has been misunderstood.

“This is a multi-pronged approach and a gradual 50-year movement that is happening anyway,” Cleine said.

He said they were, however, difficult conversations for a community to have, despite the move not being an overnight one.

But he said councils had to be thinking of the next generation, and what was going to be liveable for them.

“The easy thing to do is to kick it all down the road,” he said.

Efforts to relocate rural communities hit by storm events can be fraught affairs.

In 2005, Bay of Plenty village Matata was inundated by debris flows during heavy rains falling at the rate of 2mm a minute.

Future flood risks prompted the Whakatāne District Council to require residents to abandon the town by March last year in a managed retreat programme. The programme cost Whakatāne District Council, central government and BoP Regional Council a total of $15m.

The exercise has been held up as an example of the challenges likely to face other communities as climate change impacts ratchet up.

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