The rising sea levels and extreme weather events caused by climate change are putting coastal properties at risk of flooding and erosion. This has led to soaring insurance premiums for homeowners who live near the shore, adding financial stress to their lives.
Climate change increases the risk of coastal hazards
According to a report by BusinessDesk, a New Zealand-based news outlet, climate change is increasing the frequency and intensity of coastal hazards such as storm surges, waves, and coastal erosion. These hazards can damage or destroy coastal properties, infrastructure, and ecosystems.
The report cites a study by NIWA, a Crown research institute, that found that about 125,000 buildings, 2,000 km of roads, and five airports are within 1.5 meters of the mean high water spring tide level in New Zealand. These assets are worth about $38 billion and are vulnerable to coastal flooding.
Another study by Motu Economic and Public Policy Research, an independent research institute, estimated that the average annual cost of coastal flooding and erosion could increase from $88 million in 2015 to $370 million in 2050, and up to $14 billion in 2100.
Insurance premiums reflect the rising risk of coastal hazards
As the risk of coastal hazards increases, so does the cost of insuring coastal properties. Insurance companies use sophisticated models to assess the probability and severity of natural disasters and adjust their premiums accordingly.
According to BusinessDesk, some coastal homeowners in New Zealand have seen their insurance premiums rise by more than 300% in recent years. Some have been unable to renew their policies or have been offered only limited cover.
The report also notes that some insurers have started to use geospatial data and satellite imagery to map the flood risk of individual properties, rather than relying on postcode-level data. This could lead to more accurate pricing of risk, but also more variability and uncertainty for homeowners.
Coastal homeowners face financial stress and difficult choices
The soaring insurance costs are putting financial pressure on coastal homeowners, especially those who have low incomes or fixed incomes. Some homeowners may struggle to afford their mortgage payments or face negative equity if their property values decline due to coastal hazards.
The report also highlights the emotional and psychological stress that coastal homeowners face as they cope with the threat of losing their homes or being forced to relocate. Some homeowners may feel attached to their homes or communities and resist moving away from the coast.
The report suggests that coastal homeowners need more support and guidance from the government, local authorities, insurers, and banks to deal with the impacts of climate change. It also calls for more investment in adaptation measures such as coastal protection, managed retreat, and land use planning.