Insurer IAG calls for an end to building homes in flood zones

Wednesday, 17 August 2022

The flooded Maitai River in Nelson enters houses in Avon Terrace, Nelson.

Insurance company IAG has called for building in flood-prone areas to stop.

IAG, which owns the State, AMI and NZI insurance brands, also called for insurers, government and councils to work together to identify and prioritise flood-prone areas.

A national programme of investment in flood protection for tens of thousands of people who lived in the most flood-threatened homes was also needed, the insurer said.

The call came as a state of emergency was declared in rain-battered Nelson and Tasman.

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The flooded Maitai River in Nelson engulfed cars.

Last week IAG announced an A$347 million (NZ$384m) after-tax profit for the year to June 30, but said it would have been higher but for a rise in claims following extreme weather events including floods in Auckland, the wider North Island and Westport.

IAG also set a target of having one million Australian and New Zealand customers take action to reduce their risk from natural hazards by 2025, but did not say how it hoped to make that happen.

Around a fifth of IAG’s business is in New Zealand, and it insures half of households here.

Speaking after last week’s profit announcement, IAG managing director Nick Hawkins criticised New Zealand’s flood planning and infrastructure.

“A large driver of the flooding in New Zealand is infrastructure-related. Poor maintenance of infrastructure, storm water drains, levy banks breaking, people building in high-risk flood zones, new infrastructure going up, but they’re not adjusting or looking after how water’s going to cope with the new buildings,” Hawkins said.

IAG New Zealand chief executive Amanda Whiting called for an end to building in flood-prone areas.

“The most sensible course of action is to stop making this problem worse and better protect the 1% of New Zealand homes that are most exposed to flooding,” Whiting said.

“We see first-hand the devastating impact flooding has on New Zealanders and the risk it poses to people’s lives and general wellbeing,” she said.

“The last two years alone have seen 10 major floods with insured losses of around $400 million.”

Despite this, developers continued to build in flood prone areas, she said.

IAG's call followed the release earlier this month of the Government’s National Adaptation Plan, which noted about 675,000 people lived in areas prone to flooding.

“We need to be much more specific, targeted and urgent about the steps we will take to reduce the risk of flooding,” Whiting said.

Local Government New Zealand (LGNZ), which counts 71 local councils as members, said faster action was needed.

LGNZ’s chief executive Susan Freeman-Greene said: “With one-in-100-year weather events becoming increasingly common, we need immediate solutions rather than waiting for years to put plans into place.”

The National Adaption Plan was promising, but the country might have to wait a decade to see any practical changes, she said.

Many councils were already mapping out flood prone areas, but the country needed a more cohesive approach, Freeman-Greene said.

A partnership approach as suggested by IAG would mean insurers, technical experts, central and local government would be more open to sharing data and information, and making tough decisions in the interest of communities, she said.