Insured losses are only part of the picture. Taking under-insured and uninsured losses into account, total economic losses may be twice this level. A such, total climate related combined losses for this year and 2020 likely exceed $1 billion. Aside from the high, and growing, immediate financial costs of these events, they bring widespread and long-lasting social, environmental and economic disruption.
"This year’s new record underlines the importance of insurance to Aotearoa New Zealand," said Tim Grafton, of the Insurance Council of New Zealand - Te Kāhui Inihua o Aotearoa. "While taking out insurance helps consumers both price and manage their own risks, doing so does nothing to actually reduce the risk of being impacted by an extreme weather event. To do that, Aotearoa New Zealand must invest in making itself more resilient."
Reducing risks by adapting defence measures
Risks must be reduced by investing in adaptation measures such as flood defences. In some cases, honest conversations will have to be held around managed retreat and where homes, businesses and community assets, such as roads and three waters infrastructure, are built and maintained.
Society needs to take a long view to climate risks. Householders, community groups, Iwi, businesses, farmers and insurers all have a role to play. However, much of this mahi, and cost, will fall to central and local government to ensure there is the right legal framework and investment in place to manage these risks over the decades ahead. This will be a multi-decade, multi-billion dollar process.
"The reduction of risks through investment in resilience is central to maintaining both the affordability and availability of insurance," added Grafton. "In that way, we can ensure that when the worst happens, insurers are there to help put householders, businesses and communities back on their feet."
In August, the Insurance Council of New Zealand reported that insurers paid $32 million for insured losses resulting from the tornado that tore through South Auckland on 19 June.