Insurance Council of Australia
Resilience Investment
A five-year program of resilience measures costing approximately $2 billion would be expected to reduce costs to governments and households by more than $19 billion by 2050, delivering a return on investment of almost 10 times nationally. The Federal Government must extend the disaster resilience fund to a 10-year rolling program, matched by states and territories.
In the face of worsening extreme weather, governments at all levels need to increase funding to strengthen Australian homes and businesses, helping communities to build their resilience in the face of worsening fires, floods, cyclones and storms. This increased investment needs to be coupled with a change in approach to what we build and where we build it to avoid repeating the mistakes of the past.
This includes funding for:
Home buyback schemes are important tools for governments to reduce risk, particularly in areas which pose the greatest risk of life, such as flood plains. Greater government funding is required for pre-emptive buy-backs, underpinned by long-term thinking to identify where the most at-risk communities are, and how they can best be moved out of harm’s way.
All governments should also invest in programs that support disaster mitigation projects, such as house raising and retrofitting. There are a range of measures that can be taken at the household level to retrofit homes to make them resilient from extreme weather events, such as floor raising (floods), roof tie downs (cyclones) and use of non-combustible materials (bushfires).
Greater government Investment in resilience and mitigation projects, such as levees and floodways, as well as targeted measures like prescribed burning, is required to more effectively protect communities exposed to extreme weather risk. While these measures may not entirely eliminate all risk, they are effective at reducing damage.
The Insurance Council of Australia is advocating for increased funding to make Australian homes, businesses and communities more resilient to natural perils. The Insurance Council’s advocacy priorities include:
Competence and Compliance
Up to 72 percent of residential properties in Australia have defects with an estimated cost of $2.5 billion. State and territory governments must continue to swiftly implement the findings of the Building Confidence Report including ensuring competent practitioners are involved in the design and construction of buildings, supported by stronger auditing and enforcement to achieve compliance with the National Construction Code.
Improving Australia’s building and construction standards is critical to protecting the interests of people who own, work, live, or conduct their business in Australian buildings. Building failures impose significant costs on owners, erode community confidence and undermine public safety.
The keys to improving these standards is by ensuring new buildings are constructed to all relevant standards and requirements set out in the National Construction Code and by strengthening building competence and compliance. It also relies on a more robust and transparent system of inspection and certification throughout the building approval process, underpinned by improved enforcement.
Poor compliance in the building and construction industry were highlighted in a 2021 report by the Centre for International Economics which found up to 72 per cent of residential properties in Australia have defects with an estimated cost of $2.5 billion per annum.
To help address these challenges, the Insurance Council advocates for all levels of government to implement actions and recommendations of the Building Confidence Report. This independent Report, undertaken in 2018, contains 24 recommendations to improve the effectiveness of compliance and enforcement systems for the building and construction industry across Australia. This includes recommendations about the use of potentially high-risk building products, such as combustible cladding.
The Insurance Council continues to advocate for the full implementation of the Building Confidence Report, including:
The Insurance Council of Australia, in conjunction with the Society for Fire Safety and the Fire Protection Association of Australia, have developed a Combustible Facade Materials Fire Risk Identification and Reporting Protocol.
The Protocol provides a consistent assessment and reporting methodology when Combustible Façade Materials are present in buildings. The Protocol is aimed at building owners to make decisions in relation to its removal and remediation, and underwriters to set premiums.
The Protocol outlines a four-step fire risk and reporting protocol, including:
As outlined in the document, users of the Protocol should also check with their local regulator on issues such as removal and testing requirements.
What we Build
Strengthening the National Construction Code to require new homes are made more resilient to extreme weather events could save an additional $4billion a year. The Insurance Council of Australia is working to embed resilience in the NCC and uplift Australian Standards.
Many of Australia’s existing buildings are not resilient to extreme weather events, and homeowners will continue to face increased risk as extreme weather becomes more frequent and intense in our changing climate. Without increased government focus to make Australian homes and businesses more resilient to worsening extreme weather, these risks will continue to increase.
That is why the Insurance Council of Australia supports the principle of resilience being embedded in the National Construction Code (NCC) to ensure future buildings are better able to withstand bushfires, cyclones and floods.
The NCC is the primary set of technical design and construction provisions for buildings which sets the minimum required level for the safety, health, amenity, accessibility and sustainability of certain buildings.
Resilience, however, is not one of these principles.
When it comes to the measures that do exist, they are based on historic events and data, whereas buildings that are being constructed today will potentially experience more intense and frequent events, as well as in different locations to where provisions might apply today.
To improve building resilience and in turn to reduce risk, the Insurance Council is encouraging Federal, state and territory governments, via their representation at the Building Ministers’ Meeting and on the Australian Building Codes Board (ABCB) board, to support amendments to the NCC and relevant Australian Standards that prioritise enhanced resilience of buildings that take into consider current and future climate projections.
The Insurance Council welcomes action by the ABCB to advance this issue, including its commitment to undertake a “review of current provisions to ensure NCC-compliant buildings are resilient to extreme weather caused by climate change”.
Climate resilience of buildings is the ability of a building, structure and its component parts to minimise loss of functionality and recovery time without being damaged to an extent that is disproportionate to the intensity of a number of current and scientifically predicted future extreme climatic conditions, such as wildfires/bushfires, storms, hurricanes/cyclones, flooding, and heat.
Taking action in this area is also critical to addressing the growing challenge of insurance affordability and availability, given insurance prices reflect the level of risk within a given market. Failure to act will also cost billions of dollars for recovery and add to an already strained insurance sector.
In 2023, the Insurance Council engaged the Centre for International Economics to undertake a high-level economic analysis of the potential benefits of recognising building resilience in the National Construction Code to support our advocacy objective.
To download the report, click here. To download the Insurance Council’s summary report, click here.
The report identifies and quantifies the main impacts that could potentially be avoided through more resilient buildings, including:
The report’s high-level finding is that annual residential building costs from the extreme weather events addressed by the NCC (bushfires, cyclones and floods) are around $4 billion per year.
Strengthening the NCC to require new to be made more resilient to extreme weather could reduce average annual building related costs by an estimated $2 billion per year for cyclones, $1.475 billion per year for floods, and $486 million per year for bushfires.
The CIE analysis shows that flooding causes expensive damage, reducing the cost-benefit of some building measures targeting flood. The study supports ICA’s call to see states and territories reform planning rules so that new homes are not built in high-risk areas of the floodplain.
These report estimates costs double by 2050, as events become more severe or more frequent because of climate change. Strengthening the NCC could play a significant role in reducing these costs.
In 2024, the Insurance Council will continue its advocacy campaign to ensure the next edition of the NCC includes a definition for resilience. Key activities will include:
Where we Build
Too many homes are in the direct line of flood, fire, cyclone and coastal hazards as a legacy of past planning decisions whether either the knowledge did not exist, conditions have changed or not enough account was given to extreme weather risk. State and territory governments must amend planning legislation to consider property and community resilience to extreme weather events, including limiting development in high-risk areas.
As the climate warms, extreme weather events are occurring with greater frequency and severity, impacting a growing number of Australian homes which are in the direct line of flood, fire and cyclones, or at risk from actions of the sea.
These recent extreme weather events have included major flooding in South-East Queensland and Northern NSW in early 2022 which caused nearly $6 billion in insured damages. This was the second costliest insured event in the world in 2022 and the costliest insured event recorded in Australia. In the 2019-2020 Black Summer bushfire season, nearly all buildings were destroyed within 500 metres of bushland.
The impacts of these extreme weather events highlight not enough consideration was given to these risks at the time of planning and approval. But they also present an opportunity to improve where we build in the future to ensure we do not repeat the land use planning mistakes of the past.
Changing the risk profile of communities exposed to extreme weather will make homes, businesses and communities more resilient to extreme weather, by shifting what we build and where we build it.
Improving our land use planning is also critical to closing the insurance coverage gap by reducing or mitigating the risk that is present. As flood risk grows, so do challenges with the affordability and availability of insurance in vulnerable areas around Australia. In some high-risk regions, insurance premiums have become prohibitively expensive, leading to a growth in properties being either underinsured or having no insurance at all.
The Insurance Council of Australia is working to ensure extreme weather risk is more appropriately assessed and addressed in land use planning arrangements. It is doing this by working with industry and governments to advocate for a range of policy reforms that that reduce risk and will help to address the insurance protection gap. These include:
The Insurance Council of Australia (ICA), Master Builders Australia (MBA) and the Planning Institute of Australia (PIA) held in 2023 the inaugural National Industry Roundtable Land Use Planning and Resilience. The event established a shared position on this complex policy challenge and built broad support across industry for land-use planning reforms.
The roundtable made clear that Australian communities are bearing increasing costs of homes being developed in areas of extreme risk. Without reform, there is a risk that more housing will be developed in high-risk areas to cope with population increases. And as the climate continues to change, more people, properties and assets will be exposed to risk as existing flood zones are likely to expand.
To address these challenges, participants agreed that all tiers of Government should build capacity to plan, invest and act across the full spectrum of hazard situations by:
Further information, Communique, Land Use Planning Roundtable, July 2023
The Insurance Council has developed a range of resources to assist industry and government to better understand the risks posed by a changing climate, and the need to ensure land use planning arrangements are amended to take into account these growing risks.
Climate Change Impact Series: Actions of the Sea
This report found modern day land use planning settings do not adequately protect property from flood risk. It pointed to current standards which generally require new housing not be located within a 1-in-100 Annual Exceedance Probability (AEP) flood hazard area. Reliance on the 1% flood standard has historically assumed that the residual risk from larger events will be infrequent and minor enough to be generally acceptable to communities. However, analysis of flood claims data suggests that contemporary homes built above the 1% flood level are sustaining an unacceptable level of damage.
Climate Change Impact Series: Flooding and Future Risks
This report found that as sea levels rise, Australia’s exposure to coastal erosion and inundation will increasingly render exposed properties uninhabitable. In the context of the insurance industry, “Actions of the Sea” – which include the risks of tidal inundation, coastal and estuarine inundation, coastal erosion, shoreline recession, sea level rise, tsunami – represent a protection gap, where insurance coverage has limited availability due to the inevitable nature of the risk to exposed properties.
Building Australia’s Resilience
This report provides a suite of policy recommendations for federal, state and territory governments, across three key areas:
In 2024, the Insurance Council will continue its advocacy campaign to ensure new homes are no longer being built in high-risk areas and existing homes have either undergone upgrades to reduce risks from extreme weather events or in exceptional cases have been relocated.
Key activities will include:
