Labour Finance Spokesperson Barbara Edmonds says New Zealand needs to show insurers the country believes in climate change and is taking climate adaptation seriously.
Speaking at the last day of the Financial Services Council's conference, insurance was one of the main focuses of Edmonds’ keynote speech where she noted insurance plays a key role in ensuring financial stability.
Edmonds was a tax lawyer before she became an MP. During the previous Labour-led Government her Ministerial portfolios included –among others – Revenue, Economic Development, Internal Affairs, Pacific Peoples and Associate Finance and Associate Cyclone Recovery.
“Many of you have seen and experienced a huge increase in insurance premiums over recent years,” she told conference attendees on Thursday morning, going on to say that the extreme weather events NZ experienced in 2023 showed there was a need to “future proof” the country’s infrastructure.
New Zealand’s two biggest general insurers – IAG NZ and Suncorp NZ – both reported massive growth in annual Gross Written Premium (GWP) in August. GWP is the actual premium less all premium refunds and rebates.
IAG NZ’s GWP jumped 15% to NZ$4.12 billion in the 12 months to June 2024 while Suncorp NZ’s GWP rose 17.3% to $2.8 billion in the same period.
Statistics NZ's Consumers Price Index showed insurance costs up 14% in the June year.
“As we experience more frequent extreme weather events and there is a greater transition to risk based pricing for insurance, we should expect premiums to rise, especially for exposed communities,” Edmonds said.
Edmonds said If insurers stopped providing insurance cover, then banks would be unlikely to provide finance – which would mean the Government may be required to act.
She added that insurers hadn’t anticipated the losses from a flood in Auckland and never expected a cyclone of the level insurers saw in the Hawke's Bay region from Cyclone Gabrielle.
The Insurance Council of New Zealand (ICNZ) said in July $3.3 billion has been paid out by insurers so far from damages and destruction caused by the Auckland floods and Cyclone Gabrielle.
“These types of events were not in their modeling, but now they are, insurers and reinsurers look at what governments are doing to help adapt to climate risks and quite frankly, they're not kind of seeing that much from this government,” Edmonds said.
“Earlier in the year, Suncorp called for enhanced central coordination on climate adaptation. But what has this government done? They canceled the National Resilience Plan and the Climate Emergency Response Fund, both of which were helping communities adapt to the changing climate and investing in resilient low emissions infrastructure.”
The Finance and Expenditure Committee is currently undertaking an inquiry around climate adaptation and will be providing recommendations and principles on the framework to Climate Change Minister Simon Watts later this year.
Under the previous Labour Government, work on a climate framework had been done under the Environment Committee Committee.
Edmonds said on Thursday the Treasury had stated that climate change is “perhaps our most significant risk to the sustainability of our wellbeing as a country”.
NZ needs to show to insurers that the country believes in climate change and is taking climate adaptation seriously by understanding and mitigating natural hazard risks, she said.
“As a nation, we must integrate resilience and climate change considerations into every aspect of our infrastructure, planning and decision making processes so that insurers can be confident the government is working to minimise risk.”
Insurance Council of New Zealand Chief Executive Kris Faafoi told the Finance and Expenditure Committee in July that NZ's increase in natural hazards is impacting the cost and availability of reinsurance, which in turn is affecting the cost and availability of general insurance across the country.
NZ needed to be sending “strong signals” it was doing everything it could to prepare for and reduce climate risk in order for reinsurance markets to continue to have confidence in NZ.
“Maintaining that reinsurance is vital for our economy,” he said at the time.
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