Insurance Retreat

Insurance Retreat explained

Partial Retreat

With a property’s increasing exposure and vulnerability to escalating hazards, an insurer may introduce terms that transfer a significant proportion of a property’s risk back onto the policy holder. These are usually seen through monetary gaps on coverage, hazard-specific excesses, or unbundled insurance where an entire hazard is excluded.

Full Insurance Retreat

When the cost of insuring for a particular hazard gets so great, an insurer may decide your house is “uninsurable” and withdraw insurance altogether.

Insurance is a requirement for residential mortgages in Aotearoa New Zealand and failing to maintain insurance can trigger default. While mortgages are often granted with repayment periods of up to 30 years, insurance contracts are renewed annually. An insurer can exit a market within 12 months, while a lender may still have decades before their loans mature.

Deep South National Science Challenge: Insurance Retreat December 2020 Report

In December 2020, the eagerly anticipated “Insurance Retreat” report for the Deep South National Science Challenge, was published.

Key conclusions

• Within Aotearoa New Zealand’s four largest cities: Auckland, Wellington, Christchurch and Dunedin, at least 10,000 houses currently sit within a 1-in-100-year coastal flood zone. Nationally, around 450,000 houses are within 1km of the coast. These homes are likely to be affected by more frequent and intense storms and by sea level rise.

• Aotearoa New Zealand has relatively small tidal ranges compared to elsewhere in the world. This means only a very modest amount of sea level rise is sufficient to change the probability of a storm surge overtopping previous high-water marks.

• Homes in Wellington and Christchurch which currently have a 1% probability of coastal inundation are expected to face a partial insurance retreat from 2030, with homes in similarly exposed locations in Auckland and Dunedin following only a few years later.

• In these four cities, full insurance retreat is likely to occur for at least 10,000 properties by 2050.