Mandatory public insurance levy? Paying the price for climate change

Emeritus Professor of Public Policy at Victoria University, Jonathan Boston.

Photo: supplied

A leading climate academic is warning a mandatory public insurance levy will be needed to protect homeowners from looming catastrophic events.

The government is drafting a climate adaptation bill, and last year received recommendations from an independent reference group. Those recommendations include giving people easy access to risk information in a timely way and for the government to provide financial lifelines to more vulnerable, low-income communities.

But it also said that over the long-term the government could continue to be the insurer of last resort, and that property buyouts should not be expected.

Climate Change Minister Simon Watts has said the government is beginning a reset of expectations of its role in providing financial assistance to homeowners after a major climate event.

With home insurance up 40 percent in the last two years, there were growing concerns insurance would become unaffordable or for some, unavailable.

Emeritus Professor of Public Policy at Victoria University, Jonathan Boston, lays out these critical challenges in his new book, Insuring the Future. He appeared on RNZ's Nine to Noon as Wellington was being hit by extreme swells, forcing evacuations, calling it a "microcosm" of what New Zealand was already facing.

"We need to understand that New Zealand is a reasonably risky place to live and to own property. We have multiple geophysical risks and we have increasing weather-related risks associated with climate change.

"The second point is that the future is going to be radically different to the past, particularly in relation to weather-related risks. We are facing unprecedented risks over the coming decades and indeed, centuries. And unless we recognise that, we are not going to have policy frameworks that are fit for purpose and that can ensure we have enough economic and societal resilience."

Just how bad it gets will depend on whether the world can successfully limit greenhouse gas emissions, he said, and keep sea levels in check - as well as not building in vulnerable areas.

He said residential property insurance premiums on average have risen ninefold in the last 25 years, fourfold after taking into account inflation.

"In my case, our home has gone from under $2000 to nearly $8000 for home and contents insurance… More and more people will be finding it very difficult to afford insurance."

Cover of the book 'Insuring the Future' by Jonathan Boston.

Photo: Te Herenga Waka University Press

He disagreed with the reference group's conclusion the government could not continue to bail out people whose properties are rendered unlivable by the changing climate.

"In my view, one of the defining functions of the state, one of its inherently critical functions, is to deal with risks that are beyond the capacity of individuals and local communities to manage and address themselves. And the report seems to be saying in the face of unprecedented risks as we go forward, the state should kind of withdraw. from managing that risk.

"In my view, we should be doing the opposite. We should be taking a very proactive, precautionary approach and saying, among other things, we need to be protecting properties where it's cost effective to protect them. And there should be some degree of public support for that.

"And secondly, we should be moving properties that cannot be protected or it's simply not cost effective to protect them, we should be moving them out of harm's way and ideally before they suffer significant damage."

But that would not mean every cost would be palmed off onto taxpayers, he said.

"There should be caps on the amount of assistance that is provided, and we can debate where those caps are. And secondly, we should favour people's principal places of residence rather than their beach cottages and so on, the basis that we need to ensure that everyone is properly housed. Housing is a human right. We need to ensure that people have adequate shelter.

"So our view was that for a manner of reasons, it was going to be preferable from an economic point of view in terms of the cost of the country and the cost to the state if we have a proactive approach to addressing the problem, avoiding risk where we can, mitigating risk when we can, and removing people out of harm's way when other options are not available.

"The independent reference group seems to be saying in the face of unprecedented risk, the state should somehow pull back and that somehow by not contributing to addressing the problem of moving people out of harm's way. Somehow society is going to continue to function adequately and somehow the long-term costs to the government and to the community are going to be lower."

Strong waves hit Wellington's coast in June 2026.

Photo: SAMUEL RILLSTONE / RNZ

The Natural Hazards Commission - which began as the Earthquake and War Damage Commission, and then just the Earthquake Commission - needed expanding to cover weather, Boston argued.

"It's going to be weather-related hazards that are going to increasingly dominate people's lives over the coming decades and beyond.

"So my argument in the book is that we need to expand the coverage of perils by the Natural Hazards Commission along the lines of what happens in many countries around the world so that it covers weather-related perils, particularly things like flooding of various kinds, windstorms, hailstorms, and so on."

He said it was a system already in place in countries like France, Switzerland and Spain "to some extent".

"But the critical thing here is that we can't just look at insurance on its own. It has to be an integral part of a carefully designed package.

"In addition, I think the Natural Hazards Commission should have some responsibilities in relation to adaptation. If the commission has some responsibility for taking on the risks associated with weather related events such as floods, and if it has the tools to help the process of adaptation, it will have a very strong incentive to use those tools to mitigate its long-term risk from floods and so on."

That would inevitably result in a higher levy insurance consumers currently pay, at least initially - but over time he hoped better risk mitigation and planning would cut premiums.

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