NZ under-prepared for climate risk, bailouts unsustainable – expert group

Wednesday, 9 July 2025

Weather-related events like floods, storms and coastal inundation could increase between 19% and 26% in the next 25 years.

New Zealand is under-prepared for the impacts of climate change it’s already experiencing and the taxpayer can’t be expected to continue funding bailouts , the Government has been warned.

In its report published Wednesday, the Independent Reference Group on Climate Adaptation, said $4.1 billion in household assets could face serious harm over the next 30 years.

“Central government should signal a gradual reduction in any post-event financial assistance to property owners”, the report said.

Instead the group, established by the Ministry for the Environment to support development of national policy on adapting to climate change, said investing in ways to reduce risk should be encouraged.

But it also said those who would benefit most financially from investment in climate resilience should pay most.

“Central government should contribute to investment where that investment will protect Crown assets, or where broader national benefits can be realised,” it said.

However, central government investment or other financing strategies may be appropriate to help overcome challenges in particularly vulnerable areas, where there is less ability to pay, it said.

And the report said the central government would have an enduring role to support those facing hardship to recover, people should not expect buyouts in the long term.

Some costs and losses needed to lie where they fall, the group concluded.

Taxpayer and ratepayer-funded buyouts after natural disasters have included the Red Zone in Christchurch following 2010-2011 earthquakes, and many homes in Auckland following flooding in 2023.

But those bailouts had meant homeowners had less incentive to understand and manage their own risk as there was an expectation that buyouts would continue, the report said. That created a moral hazard, the report said.

Matt Whineray, former chief executive of the Guardians of New Zealand Superannuation, chaired the Independent Reference Group on Climate Adaptation.

The report also warned that property prices, mortgage and insurance costs needed to move over time to reflect climate risk.

Last year, lawmakers warned it was not Government’s job to preserve the value of New Zealand homes as climate change makes living in certain parts of the country more difficult. Already some homes are becoming uninsurable, or at best extremely expensive to insure.

People needed “fair warning”, and sufficient time to adjust their expectations, the group said, and it suggested a 20-year adjustment period to “spread costs”.

Many of the losses property-owners face will be as a result of rising sea levels and coastal inundation, the Independent Reference Group on Climate Adaptation warns.

“Making decisions now will enable New Zealand to spread the costs of adapting over as long a period as possible,” the group said.

The later the decisions are made, the greater the risk that changing financial markets will impact homeowners in ways they cannot anticipate or prepare for, the report said.

New Zealanders will need to be be responsible for knowing their risks and making their own decisions on whether to stay in a high-risk area or move away, the report said.

The Red Zone in Christchurch is a haunting reminder that where we build homes matters.

“Property values and the cost of ownership, such as insurance premiums or mortgages, should reflect the changing level of risk,” it said.

Recent climate change scenario analysis suggested average annual losses from weather-related events like floods, storms and coastal inundation could increase between 19% and 26% by 2050, it said.

Jimmy Higgins, chief executive of Suncorp NZ, says, ‘There’s no easy way around these challenges, so we have to move through them, together. And that starts by being honest about the risks, and having the courage to talk about them now, not after disaster strikes.’

The group called for an immediate end to development in disaster-prone areas.

The group also called for urgent action to establish a national disaster adaptation framework.

A fragmented national approach, under-resourced local councils and a populace that lacked information were just some of the things that needed to change.

Jimmy Higgins, chief executive of Suncorp, which owns Vero and majority-owns AA Insurance, was a member of the seven-member group, said: “We’ve seen the devastating impact extreme weather events have had on our communities and we can’t keep repeating the same reactive cycle of damage and recovery.

“One of the most important recommendations in the Independent Reference Group report is the call to invest in publicly accessible natural hazard and climate risk data. This is a crucial first step toward a fairer, more informed system, and it’s a step that we can take right now,” he said.

“Too many New Zealanders simply don’t have access to accurate, up to date information about the natural hazard risks that they’re exposed to. A nationwide natural hazard database would give not only everyday Kiwis, but also policymakers, iwi and businesses, the power to plan, to act, and to protect what matters most.”