What An Increase In Severe Weather Could Mean For The Insurance Industry
It's been absolutely heart wrenching to have seen a number of severe floods in 2021 alone. With the most recent and most devastating being the floods in Marlborough and the West Coast.
A large number of families were forced out of their homes, with no choice but to leave most of their belongings behind. Many residents had moved into temporary emergency accommodation and some with friends and family. An approximate of 200 homes were deemed as uninhabitable in the West Coat's Buller District.
IAG's executive general manager, Dean Macgregor said that IAG have seen an influx of claims streaming in since the event. "Our thoughts are with those who have been affected by the severe weather and flooding event that caused significant damage to homes and properties in the Buller region and other parts of the country", MacGregor said.
Tim Grafton, ICNZ's chief executive expressed his concern, revealing that 2020 set the record for the highest insured losses as a result of extreme weather events. This year has already seen two major weather events already (the first being the Canterbury flooding) and this pattern is only expected to strengthen. Grafton suggests that if these events continue, we may see the effects of this flow into the insurance industry.
"The last flooding event was clearly something which hasn't been seen on the West Coast for decades, and the flooding that occurred in Canterbury earlier this year was on a scale that some likened to a one in 500-year event, so that was extreme" Grafton said.
Associate Professor Assad Shamseldin from the University of Auckland's Civil and Environmental Engineering department, stated that these flooding events could be the "new norm" as a result of climate change. He also suggested that people and their communities should reassess the risks that their homes and/or businesses are exposed to. Raising the floor levels, relocation, stop banks and increased warning are just some methods to mitigate the impact of such events.
If these extreme weather events continue, Grafton suggests that insurers may look to revaluate and respond to the increased risk of floods. He said, risk appetites may shift as a result of more frequent and sever weather and the response may be to reflect this risk in price and/or through exclusions. While this may not be the case any time soon- it is definitely a possibility as disruptive weather events continue to occur.
"Unless we do something about reducing those losses through risk reduction and adaptation measures, then we will see a pattern of insurers pricing that risk accordingly."