Vero Insurance says weather-related claims have surged to $186.4 million over the past year, and warns climate change is projected to push up claims costs between 12% to 15% by 2040

Vero Insurance says natural hazard claims costs for weather-related events are projected to increase by between 12% and 15% by 2040, and 21% to 27% by 2050.

This comes as Vero, which is owned by Suncorp Group Limited, released its Financial Year 2026 (FY26) Climate Statement for the year to June.

Suncorp is one of Australia's largest general insurers and in New Zealand, it is the country's second-largest general insurer with the Vero Insurance brand and the joint venture AA Insurance business. 

Vero's climate report, released on Wednesday, said: “The total incurred cost of claims related to weather-related natural hazard events in FY26 was $184.6 million, of which $1.8 million was recoverable from reinsurers."

“Net incurred costs were $97.3 million above the FY26 natural hazard allowance for weather-related events.”

The total incurred costs is a jump from the previous year, from $70.6 million, none of which was recoverable from reinsurers.

“Net incurred costs were $8.4m below the FY25 natural hazard allowance for weather-related events," the report said.

Natural hazard allowance is an estimate of expected long-term average natural peril costs. 

“As year-to-year outcomes are inherently volatile and influenced by factors such as weather conditions, actual natural hazard experience can vary materially from the natural hazard allowance each year," Vero said.

Potential natural peril costs in the future

In Vero’s climate statement, it said in the short term that natural peril costs were expected to remain “subject to year-to-year variability, driven by the frequency and severity of weather-related events - both of which are influenced by the effects of climate change."

Using scenario analysis, in the medium term, Vero projected that “by 2040, climate change is expected to increase the cost of natural hazard claims for weather-related perils by 12% (low warming scenario) to 15% (high warming scenario).”

“In the long-term, by 2050, climate change is expected to increase the cost of natural hazard claims for weather-related perils by 21% (low warming scenario) to 27% (high warming scenario).”

'May affect the cost and availability of insurance'

Vero said: “If left unaddressed, these rising physical risks will lead to higher costs for insurers, including an increase in the cost of claims and reinsurance, which in turn may affect the cost and availability of insurance cover.”

“Factors such as population growth in high-risk areas, without effective land-use planning may further increase the risk, whereas improved hazard mitigation or more robust adaptation measures would help reduce the risk.”

Aotearoa is viewed as the second riskiest country in the world when it comes to natural hazards, and since 2010, $64 billion has been spent on natural disasters, an average of around $4.2 billion a year.

And since 2000, the price of house insurance has increased 916% - which consumer advocacy organisation Consumer NZ says is the biggest price rise for goods monitored by the Consumers Price Index (CPI) over the past 25 years. Alongside this, premiums have increased three times more than CPI inflation since 2011.

Vero calls for a ‘coordinated national approach’

Suncorp executive officer Tom Hinds said its climate statement showed that addressing climate-related risks will be “essential” to managing the cost of claims, reinsurance and “maintaining affordable and accessible insurance cover in the coming decades.”

Hinds said action was being taken across its business to “build resilience” and to adapt its products and services to “support this transition.”

“But long-term protection will require a coordinated national approach."

Vero Insurance isn’t the only one calling for action with the Insurance Council of New Zealand (ICNZ), a lobby group for general insurers, saying the next government must prioritise climate adaptation, resilience and long-term funding to reduce the country’s exposure to natural hazards.

ICNZ chief executive Kris Faafoi said NZ has spent a lot of time talking about the problem - but thought it was positive that National leader Christopher Luxon and Labour leader Chris Hipkins recognised the challenges that extreme weather posed.

Last week, during their final leaders' debate, hosted by Stuff, the pair spoke about insurance and climate change.

Asked how they were going to deal with communities who may not be able to get insurance or a mortgage in the future, Luxon said there was "information asymmetry going on."

"Insurers, the banks, others actually have data and information about the risk around New Zealand's key communities that are going to be deeply impacted. We need to make sure that that data is all out there on the table, that it's democratised and available to all, because between local government, central government, landowners, banks, and insurers, we're going to have to work out how we do the burden sharing and actually over time how we mitigate the risk that we've got with climate change events and adapt to that. That's the first phase: is to get the data on the table."

Hipkins said there needed to be a nationwide approach to managed retreat.

"We're not talking about something that's going to happen in 10 years. We're talking about something that's going to happen over 30, 40, 50 years. We need to bring all the relevant communities together, central government, local government, the insurance sector-they've got skin in this game, and they should be involved in this discussion. Okay, so we need, but we need a consistent plan across the country to do that," he said.

‘Recovery is not a substitute for reducing risk before disaster strikes’

Faafoi said: “The next Government must pivot to action to reduce risk for New Zealand’s communities that are the most vulnerable to natural hazard risk."

"That means investing in flood protection and other resilience infrastructure, making better planning decisions and avoiding further development in high-risk areas. It also means facing difficult decisions about how and where communities develop.”

Recently-released research commissioned by ICNZ found that about seven in 10 New Zealanders saw managing flood, landslide and coastal inundation risks as a significant challenge for future governments over the next decade.

The survey, which had 1013 respondents, showed that people were divided on whether politicians were taking extreme weather risks seriously - 48% thought they were while 43% did not. However, a majority of respondents wanted parties to work together on extreme weather risks.

Faafoi said long-term funding was critical as communities and councils needed certainty to plan and invest in resilience and adaptation measures that reduce risk.

"Insurers help communities recover after disasters, but recovery is not a substitute for reducing risk before disaster strikes."

"We need to invest ahead of events, strengthen vulnerable infrastructure and bring government, councils, insurers and banks, and communities together around a durable national approach," he said.

"Communities are increasingly feeling the impacts of climate change and the need for action is becoming more urgent. The challenges are well understood. What we need now is delivery.”