No area of Australia should be uninsurable, the Insurance Council of Australia (ICA) has argued, provided governments invest appropriately in permanent mitigation and resilience measures.
The ICA rejected the notion that climate change will ultimately prevent some Australians from being able to secure adequate coverage.
With extreme weather events such as cyclones, storms, floods and bushfires already heavily impacting many areas of the nation, it’s possible that any exacerbation due to climate change could soon raise questions about the financial viability of insuring these risks.
However, the ICA argues that more pre-emptive action on a government level could avoid this scenario, noting that only 3% of natural disaster funding is currently spent on mitigation, while 97% is spent on post-disaster recovery.
The Council strongly endorsed the findings of the Productivity Commission, which has recommended that the Commonwealth invest at least $200 million a year in mitigation and resilience, to be matched by state and territory governments.
“The Insurance Council would like mitigation investments to be treated as nation-building infrastructure,” the ICA stated. “Governments must also determine how best to ensure communities can be more resilient to the impacts of climate change.”
It acknowledged that the Senate recently voted to increase the amount of money available to the Commonwealth for mitigation measures by $50 million a year, but suggested more action will be required.
Re/insurers can support this transition, the ICA said, by helping to develop credible risk methodologies to help property owners, communities, and governments avoid costly mistakes and maladaptation.
While the tools that evolve from these methodologies will be available to all stakeholders, this work may ultimately be useful for commercial ventures, it added.
“Insurance is risk-rated, and remains competitive in all regions,” the Council explained. “Sending a price signal to high-risk areas is an important part of insurance.”
“These price signals send a message to property owners, communities and governments about their risks and serve to encourage consideration of mitigation, resilience and improvements to town planning and building codes.”
