Published: 8 April 2025
How climate change is affecting your insurance cover
Climate change appears to be having an increased impact on commercial insurance in New Zealand, as the country faces increasing risks associated with extreme weather events such as flooding, storms, droughts, and wildfires.
Changing weather patterns are leading insurers to reassess risk exposure, and as a result, they are adjusting their policies, pricing, and coverage.
Here’s how climate change may be affecting your insurance.
- Flooding: New Zealand is experiencing more frequent and intense rainfall events, leading to an increased risk of flooding, particularly in areas near rivers or the coast. For example, flood-prone areas like Hawke’s Bay and Canterbury are experiencing more frequent inundations*. Rising sea levels and more severe storms are exacerbating these risks. Properties in flood-prone areas may face higher premiums or even difficulties obtaining insurance if the insurer modelling assessing the risk becomes too high.
- Cyclones and storms: New Zealand is also more susceptible to cyclones and storms, with an increase in the intensity of these events due to climate change. Extreme weather events, such as Cyclone Gabrielle and the Auckland floods in 2023, with nearly $4bn paid in insurance claims for the two events, highlights the vulnerability of businesses to storm damage. This is reflected in insurance pricing and coverage**.
- Wildfires: Drier conditions, combined with rising temperatures, increase the likelihood of wildfires, particularly for businesses in forested or rural areas. The risk of wildfire damage is leading insurers to reassess the cost of covering properties in high-risk areas. The most severe dangers are projected for areas like the Mackenzie Country, upper Otago and Marlborough***.
- As the frequency and severity of weather-related events grow, insurers are adjusting their pricing models to account for the increased risks. Businesses in high-risk areas, such as coastal or flood-prone regions, may face rising premiums as insurers look to balance their risk exposure.
- Higher claims: As extreme weather events become more frequent resulting in an increase in claims, insurers may raise premiums across the board, not just for high-risk areas, but to cover the overall increase in claims.
- Flood exclusions: Some insurers are introducing stricter underwriting conditions, especially regarding flooding. In high-risk flood zones, they may limit coverage for flood damage, require flood prevention measures on your property, or exclude flood coverage entirely from standard home insurance policies.
- Specialised coverage: Insurers may offer specific add-ons or specialised coverage for climate-related risks, such as flood protection, landslide, or storm damage. While this helps provide more comprehensive coverage, it also comes at an additional cost.
- Risk-based pricing: Many insurers are now pricing policies based on the specific risks associated with the property’s location. This means that businesses in flood zones, coastal areas, or places with a higher risk profile for natural disasters may see significant increases in insurance premiums, excesses or may be unable to get insurance altogether, depending on the severity of the risk.
- As the impact of climate change intensifies, some properties may become increasingly difficult to insure. For example, businesses in flood-prone areas or areas affected by rising sea levels might find it hard to obtain insurance at an affordable rate. If the risks of damage become too high for insurers to absorb, some properties may be deemed uninsurable.
- Risk mapping: Insurers are investing in more detailed risk assessment tools and geographic mapping to better understand climate-related threats to properties. This includes advanced modelling of flood zones, storm patterns, and wildfire risks. Businesses might be asked to provide more information about their property’s vulnerability to climate change-related risks when seeking or renewing insurance.
Your Rothbury broker is here to help you better understand and discuss how these climate change risks may impact your insurance premiums at your next policy renewal.
* Storms and Floods Hazard | Hawke’s Bay Emergency Management & Deep South Challenge | Climate Change Tools & Information
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal, financial, or professional advice. For specific advice tailored to your situation, please consult with a qualified professional.