Could climate change leave you uninsurable?
The Reserve Bank of New Zealand has laid out the heightened longer-term risks to the country’s financial system, including banks and insurance companies in their latest report.
Specific to insurance, the threats posed to homeowners looking to insure assets in a climate of more extreme weather events such as flooding means higher premiums. This is because of the higher likelihood of an insured event occurring. The higher the premium, the higher the chance of the property becoming uninsurable because of cost.
The RBNZ report finds that in the event of insurability dropping, house prices would also drop which would affect sale opportunities and reduce the general value of your asset’s worth.
In their closing, they noted that “Managing the consequences of climate change will require coordinated action from a range of parties. Banks and insurance companies will need to ensure longer-term climate risks are adequately reflected in their lending and underwriting standards. Banks will also have a role in providing finance for mitigating actions.”
You can read the full report here.