Commissioned by the ICA, The McKell Institute report, The Cost of Extreme Weather, shows that extreme weather events over the past 12 months cost every Australian household.
Climate change
Actuaries Institute report supports resilience investment calls
Actuaries Institute report supports resilience investment calls
News release
Wednesday, 17 August 2022
The Insurance Council of Australia (ICA) has today welcomed new analysis and recommendations from the Actuaries Institute on the impact of climate change on home insurance affordably and vulnerability in Australia.
The Green Paper, Home insurance affordability and socioeconomic equity in a changing climate, details how climate change is widening the gap in home insurance affordability between average and vulnerable households across the country.
The report identifies that climate change will increase home insurance affordability pressure, with vulnerable policyholders concentrated in northern Queensland, Northern Territory and northern New South Wales.
The report finds that the median Australian household uses 1.1 weeks of gross annual income to pay their home insurance costs, demonstrating that for most insurance is an affordable and important product.
The Insurance Council strongly supports the Actuaries Institute’s calls for greater investment in resilience measures to address insurance affordability, as well as for strong collaboration between policymakers to strengthen community infrastructure.
These recommendations are in line with the ICA’s report, Building a More Resilient Australia, launched earlier this year which called for a range of measures to better protect households and communities from the impacts of extreme weather and put downward pressure on premiums. These measures included:
- A doubling of Federal funding to $200 million a year in household retrofits and community protection projects, matched by states and territories
- Better land use planning so no more homes are built in harms’ way
- Updating the national building code to including building resilience as a standard
- Removing state taxes and charges on insurance, which numerous inquiries have found to discourage adequate cover by driving up the cost of premiums.
Comment attributable to Andrew Hall, CEO Insurance Council of Australia:
This robust report from the Actuaries Institute once again highlights the urgency for all levels of governments to work together to see at risk communities better protected from the impacts of extreme weather.
The affordability of insurance is a critical issue for the Australia’s economy, and the Insurance Council and insurers share a commitment to addressing this issue over the short and long term.
If the past few years have taught us anything, it is that extreme weather is having a huge impact on the most vulnerable people in our communities and this is expected to worsen with climate change.
It is critical that we take these reports seriously and see an increase in investment to build stronger homes and local infrastructure, which can have a significant impact on the affordability and availability of insurance in Australia.
Buildings need to be made more resilient to cyclones
Buildings need to be made more resilient to cyclones
News release
Thursday, 2 December 2021
A new report released today by the Insurance Council of Australia (ICA) has found that Australia’s houses are not resilient to tropical cyclone hazards, which are expected to become more severe as the climate changes.
Prepared for the ICA by James Cook University Cyclone Testing Station in association with Risk Frontiers, the Tropical Cyclones and Future Risks report outlines the changes required to building codes and construction standards to improve the cyclone resilience of new homes, and calls for greater investment in the retrofitting of old homes to protect property and lives.
The insurance claims cost for tropical cyclones since 1967 stands at $23 billion, and Cyclone Tracy remains Australia’s costliest natural disaster with a $5.5 billion insurance bill (figs normalised to 2017 values).
The report draws on industry-wide policy and claims data from recent tropical cyclones in North Queensland, with a combined claims cost of $3.83 billion, and incorporates the damage report from Western Australia’s Tropical Cyclone Seroja earlier this year.
It finds that unless significant changes are made to both the design method and criteria for new houses the impact and losses from these events in Australian communities will only increase from an already high base.
A key recommendation of the report is that Australia’s National Construction Code considers resilience in all new property construction to reduce the damage, loss and disruption to communities caused by cyclones.
The report also recommends that federal and state governments support the development and expansion of household resilience schemes, such as the now-defunct North Queensland Household Resilience Program, which can help to reduce insurance premiums and better protect householders and communities.
The report is the second in the ICA’s Climate Change Impact Series, and follows a report released last month on the impact of actions of the sea. The final report in the series on flood impacts will be released in coming weeks.
Quote attributable to ICA CEO Andrew Hall:
At present no region in Australia is uninsurable, however if the severity of extreme weather events increases as predicted it is possible some regions may become difficult to insure in the future.
Australia’s modern houses are not resilient to the tropical cyclone hazard of today, and the National Construction Code must consider resilience for all new property construction if we are to keep all of Australia insurable.
Implementation of stronger building codes and retrofitting programs, improved land-use planning, and permanent physical mitigation measures, where necessary, will be key to ensuring an insurable Australia.
New report finds $30B needed to protect coastal communities
New report finds $30B needed to protect coastal communities
News release
Wednesday, 17 November 2021
A new report released today by the Insurance Council of Australia (ICA) estimates that Australian Governments will need to invest $30 billion in large scale coastal protection and adaptation projects over the next 50 years, as climate change makes coastal communities, property, and infrastructure increasingly vulnerable.
Climate change is driving rising sea levels and exacerbating coastal hazards known as ‘actions of the sea’ such as tidal inundation, coastal and estuarine inundation, coastal erosion, and shoreline movement.
The report, prepared for the ICA by Baird Australia, has found that as these events increase in frequency and intensity, a growing number of exposed properties in Australia will become uninhabitable.
The June 2016 storm that eroded the beach and private land on Sydney’s Northern Beaches is a stark example of this phenomena, with the almost completed mitigating infrastructure costing the local government and homeowners an estimated $25 million.
Insurance cover for actions of the sea is generally not available because of the inherent risks and is further constrained because of the growing risks from climate change impacts.
With insurance largely unavailable, the report recommends building greater protections for communities exposed to actions of the sea through three areas of activity and investment:
- Investment in coastal protection infrastructure where these can be shown to be economically and environmentally feasible
- Improved and coordinated data collection by local, state and federal governments to build a comprehensive picture of the scale of the problem
- Land use planning that considers actions of the sea, including in some cases making difficult decisions about the long-term viability of existing communities or property
The estimated $30 billion investment in large scale coastal protection and adaptation projects over the next 50 years represents just 1.2 per cent of the average yearly infrastructure spending by all local, state and federal governments.
The report finds that with this modest investment significant returns can be realised through avoided damage and financial loss for individuals and avoided community economic loss due to disruption.
However, the Baird report finds there are limits to mitigation and in some cases adaptive management and planned retreat from coastal hazard zones may be the best long-term community option.
The report recommends urgent action by federal and state governments to build a coastal hazard information database to measure and monitor actions of the sea as sea levels rise.
Quote attributable to ICA CEO Andrew Hall:
Legacy planning decisions by Australian governments have left some coastal communities, homes and infrastructure highly vulnerable to actions of the sea like tidal inundation and coastal erosion.
It’s estimated that over the next 50 years governments will need to invest at least $30 billion in large scale coastal protection and adaptation projects as climate change makes actions of the sea worse.
Insurers are generally not able to cover ‘actions of the sea’ because of the nature of the risk, but we can improve protections for communities and property owners by raising awareness of the risks, improving data and understanding, and advocating for investment in mitigation and adaptation projects.
The insurance industry stands ready to collaborate with governments to share our risk intelligence to help mitigate these growing challenges, for example working together to set robust land planning and building codes which play a critical role in reducing risk to property holders and enabling affordable insurance.
The Actions of the Sea summary report is available at Climate Change Impact Series: Actions of the Sea and Future Risks (insurancecouncil.com.au)
Climate Change Impact Series: Actions of the Sea
Climate Change Impact Series: Actions of the Sea
Status: Complete
Overview
“Actions of the Sea” encompass events such as coastal inundation, erosion, shoreline recession, sea level rise, and tsunami. The exacerbation of coastal hazards is leaving Australian communities, properties, and critical infrastructure increasingly vulnerable.
The insurance industry is seeking to raise risk awareness, and advocate for risk mitigation and adaptation with communities and governments.
The ICA has conducted a Vulnerability Study to understand the impacts Actions of the Sea present to properties and communities. The report acknowledges the growing protection gap in insurance as the changing climate increases exposure and risk.
Top takeaways from the report
- Climate change is driving rising sea levels and exacerbating coastal hazards known as “Actions of the Sea” such as coastal inundation, erosion, and recession.
- Significant additional investment will be required to mitigate the risks of coastal inundation and sea level rise.
- Urgent action is needed at all levels of government, in collaboration with industry, to build a national picture of coastal hazard risks and how to address it.
- The insurance industry stands ready to collaborate with government to share our risk intelligence to help mitigate these growing challenges.
Actions
Following this report, there has been engagement with all levels of government to understand the critical steps required to better protect communities, strengthen resilience, and enable affordable insurance.
Partnerships
- Baird Consulting
- ICA Climate Change Action Committee, and Data and Knowledge Committee
