Flood and cyclone-prone areas in eastern Australia may be ‘uninsurable’ by 2030, report suggests

Extreme weather due to the climate crisis is expected to increasingly make some Australian homes “uninsurable”, with a new report suggesting up to one in 25 households will struggle to be covered by 2030.

The analysis by the Climate Council, using data from consultants Climate Valuation, mapped the 10 electorates across the country considered most at risk of becoming uninsurable due to flood, fire and other extreme weather risk.

The most at-risk areas were mostly found to be in flood and cyclone-prone areas of Queensland and in parts of Victoria built over flood plains near major rivers.

“Uninsurable” is defined in the report as an area where the required type of insurance product was expected to be not available, or only available at such high cost that no one could afford it.

Nicki Hutley, an economist and member of the Climate Council who wrote the report, said insurance costs were already rising sharply and people were struggling to get insurance in parts of the country. She said people were seeing changes, citing the black summer bushfires and the recent devastating floods in northern New South Wales.

Hutley said the report highlighted the level of “under-insurance” across the country, a term that refers to situations in which a property was covered for lesser risks but not for the greatest threat in the area where they lived. ASIC has previously estimated the rate of under-insurance in the country may be up to 80%.

The report includes a tool that shows how the risk of different catastrophes, and uninsurability, grows under different scenarios over timeframes out to 2100. People can enter their address to see how their property is expected to be affected.

It suggested up to 27% of properties in the electorate of Nicholls, in northern Victoria, and 20% of properties in Richmond, in New South Wales, could soon be uninsurable due to flood plain risk.

Dr Karl Mallon, chief executive of Climate Valuation, said the company aimed to make risks visible to homeowners, insurance companies and authorities.

“The underlying technology is indeed intended to give people an understanding whether a property has insurance challenges in the way an insurance industry does not,” he said.

The Climate Council report used generalised assumptions about the type of building at each address: that each is a single storey, detached house built using recent design specifications and materials.

The replacement costs were conservatively assumed to be $314,000 a home, based on Australian Bureau of Statistics data of the average cost. It categorises a property as uninsurable if the expected annual cost of damage is more than 1% of the rebuild cost.

Not everyone working in the field is convinced a totally accurate house-by-house analysis is possible.

Sharanjit Paddam, an expert in climate and environmental risk at Finity Consulting, said the report was “really important” at a broad level, particularly if it started to “make people think about whether climate change is going to affect their property, and their insurance costs”.

But he said he would be reluctant to say some areas would be totally uninsurable as there was always uncertainty about models that have to make “really difficult assumptions for which we don’t necessarily have all the information available”.

“The results won’t necessarily be correct at an individual home level but it will give a good guide to where the areas of risk are,” Paddam said.

“However, I don’t think the eight years is an exaggeration because the risk is here today, and we know this is the case because the government has intervened in cyclone costs to make it more affordable today.

He said there were also costs involved in doing nothing. “Not doing anything about climate change is the most expensive option and I think this report makes that very clear,” he said.

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