Insurance crisis may require government intervention, says OECD
Insurance crisis may require government intervention, says OECD | Insurance Business New Zealand
Catastrophe & Flood
Insurance crisis may require government intervention, says OECD
With many New Zealand homes at risk of flooding, there is a looming threat in insurance coverage
Catastrophe & Flood
By
Abigail Adriatico
The Organisation for Economic Co-operation and Development (OECD) has stated that if an insurance crisis in New Zealand were to emerge, the government may need to intervene, according to a report by The Post.
According to the OECD’s biennial report regarding New Zealand’s economy, 5% of the homes in the country were at a high risk of flooding and homeowners needed to pay annual premiums that were 1% or greater than the value of their houses in order to be able to cover for the risk the structures faced.
The OECD noted that despite 96 in every 100 homes having insurance coverage, the government may need to act in order to maintain a high number of insured houses.
“It may be necessary to ensure that existing property owners, who did not always have accurate information about climate-related risks before they invested, have affordable insurance in the meantime,” the OECD said in its report, further saying that the government should not encourage people to build homes in flood-threatened areas.
The OECD stated that accurate insurance risk pricing was needed to make sure that New Zealand would stop construction of homes in areas that were prone to floods as it may help people make better decisions.
Meanwhile, the report said that nearly 90% of homes that weren’t facing flood risks were not affected by the rise in flood premiums.
The OECD said that New Zealand needed to set up strategies in order to deal with flooding, referencing the Netherlands’ evidence-based and coordinated approach to reducing its risk in flooding, which entailed the need to invest in better information-gathering and risk-modelling.
What are your thoughts on this story? Please feel free to share your comments below.
