Simon Watts says the Government is ‘moving at pace’ to get adaption framework underway as insurers reflect on last year’s North Island flooding disasters

The new Minister for Climate Change says an adaption framework is in the works as New Zealand insurers press for more collaboration around natural hazard risk prevention.

It has been almost exactly a year to the day since the devastating Auckland Anniversary Weekend floods as well as Cyclone Gabrielle which followed shortly after.

On Friday, IAG and Tower said they've paid out almost all the claims from both disasters while Suncorp says it has paid out most of its claims from the Auckland floods.

All three insurers say they want conversations and more collaboration with the new government around reducing natural hazard risks. The previous government launched a national adaptation plan.

Simon Watts – the new Minister for Climate Change and also revenue – told Interest.co.nz in a statement on Wednesday that an adaption framework was in the works.

“[....] that framework will guide the decisions that need to be made in relation to adaptation and ensure we aren't starting at square one when disasters like Cyclone Gabrielle strike,” the Minister said.

Interest.co.nz had asked if the Government was considering new legislative changes or regulatory frameworks to support climate change adaptation, natural hazard risk reduction, and managed retreat work.

But the new Government has yet to reveal what might be inside its climate change adaption framework, and whether there'll be any significant changes from what the previous government was doing. 

“This framework will be developed in collaboration with central and local government, banks and insurers, Iwi Māori and community groups, who each have a role to play as we adapt to the impacts of climate change,” Watts said in his Wednesday statement.

“We are moving at pace to get this work started so that we can have a framework in place as soon as possible.”

The previous Government's national climate change adaptation plan, released back in August 2022 which entailed a list of climate actions that the then-Government was planning to tick off between 2022 to 2028.

“For too long we have pushed climate adaptation to the back of the cupboard,” the then-Climate Change Minister James Shaw wrote in that report.

Some of the actions the previous government said it wanted to undertake across the climate-affected insurance sector included exploring options to improve the affordability and availability of flood insurance and monitoring residential insurance premiums.

However, Shaw said in the plan that central government wouldn’t bear all the costs of climate change adaptation.

“Risk and cost will fall across different parts of society, including asset or property owners, their insurance companies, their banks, local government and central government,” he wrote.

The emerging gap

IAG – New Zealand’s biggest insurer – said on Friday that a more targeted approach was needed in order to “close the emerging gap between the impacts of our hazards and how they are managed”.

“We have been actively involved in helping to improve the management of natural hazard risk and remain committed to playing our part,” IAG chief executive Amanda Whiting said.

“It’s vital that both central and local government continue to prioritise this important work on behalf of all New Zealanders.”

IAG said its NZ brands – AMI, State, and NZI – had received over 52,000 claims resulting from both the North Island floods and Cyclone Gabrielle since last year.

Of that figure, 96% of home claims, 99% of motor claims and 99% of contents claims had now been settled, the insurer said.

The insurance payouts from these disasters has surpassed $1 billion – a number IAG said was second only to the Canterbury earthquakes.

“We received six times as many claims as the same period the year before,” Whiting said.

“However, the number of claims and amount of payments only partially reflect the true social and economic cost of these events.”

In November last year, Whiting said that average claim costs were on the rise, with average weather-related claim costs at $35,000 in Hawke’s Bay, $30,000 on the West Coast, and $21,000 in Gisborne Tairāwhiti.

The chief executive of general insurer Tower described the Auckland Anniversary Weekend flooding and Cyclone Gabrielle as the “most impactful weather events our generation has known”.

Blair Turnball said on Friday that Tower had received more than 9,400 claims from the two events and as of January 24th, the general insurer had settled 91% of them – 1,051 being motor, 2,348 contents and 5,763 house claims.

“To protect Kiwis now and in the future, as a country we must lay down longer-term plans to address infrastructure gaps and reduce the risks of climate change,” he said.

“That starts with more collaboration between business, central government, and councils to share data and ideas to accelerate this.”

Suncorp’s head of disaster response David Drillien said on Friday that Suncorp NZ – which also includes Vero and AA Insurance – had received more than 17,500 claims following the Auckland Anniversary floods last year and 91% of the claims had been fulfilled.

“Those claims that remain open will be managed through to completion by our specialist claims teams and we are aiming to have almost all of these closed in the half of 2024,” he said.

“As we continue to assess our response to the Auckland Anniversary Weekend floods, Suncorp New Zealand is committed to engaging with local and central government on opportunities to build an understanding of natural hazard risk management and how we as insurers can contribute to preventing, or at least limiting, the impacts of large weather events.”

In December last year, the Insurance Council New Zealand said insurers had paid out $2.7 billion out of the $3.6 billion claims made from the Auckland Anniversary Weekend floods in January 2023 and Cyclone Gabrielle in February 2023.