Insurance, property transfer and who pays: Government seeks feedback on climate change managed retreat

The Government is seeking feedback on its proposal for responding to climate change, with big questions around insurance, property transfer and who pays for it all. 

The draft National Adaptation Plan released on Wednesday outlines the actions the Government will take over the next six years to respond to the priority climate-related risks identified in the 2020 National Climate Change Risk Assessment.

Climate Change Minister James Shaw said events like the recent floods in Tairawhiti and fires in the Waituna wetlands in Southland demonstrate the case for urgent action on climate change.

"Central Government does not bear all the costs. The consultation asks how best to share risks and costs between property and asset owners, insurers, banks and local government as well," Shaw said. 

"It also asks for views on managed retreat and flood insurance, to ensure a joined-up approach to climate change adaptation.

"Of course, the best thing we can do to stop these extreme weather events from getting worse is cutting the pollution we put into the atmosphere in the first place. Next month's Emissions Reduction Plan will set out how we plan to do that. 

"However, we know that the climate is already changing and there will be some effects we cannot avoid. I urge all New Zealanders to read the plan and make a submission."

Shaw, speaking to reporters, warned that if we don't address climate change now, it will inevitably lead to higher taxes because the money to respond to the challenges it creates has to come from somewhere. 

"I need to emphasise that we are already paying for the cost and this is about reducing future liability. The cost is getting carried and those costs will increase and if we do nothing and we are just dealing with the effects of climate change via emergency response, then that is going to equate to an increase in taxes because that money has got to come from somewhere."

Funding and financing is one of the important areas to deal with, Shaw said, but the Government is still gathering feedback on this. He said the costs right now are primarily falling on the Government in the form of disaster response management.

You can have your say by submitting to Citizen Space, between April 28 and June 3. 

Why do we need a National Adaptation Plan?

In the past 100 years, the climate has warmed by 1.1C and the United Nations Intergovernmental Panel on Climate Change has warned that if Earth warms by 2C, hundreds of thousands of species could go extinct, natural environments would die and many coastal communities will be flooded out of existence.

New Zealand is experiencing more hot days and fewer cold days, according to the Ministry for the Environment, with 2016 the warmest year on record.  

Sea-level rise is continuing at a rate of 2.4 millimetres each year, which poses a severe adaptation challenge for New Zealand, with most of our major urban centres and population located on the coast or on floodplains of major rivers.

If sea levels rise by half a metre, 36,000 buildings, 350 square kilometres of land and an extra 48,900 people would be exposed to flooding during extreme events - that's about the population of Nelson.

Over the last 10 years, climate change related floods have cost the New Zealand economy at least $120 million for privately insured damages. Economic losses from droughts have cost a further $720 million.

Insurance, property transfer and who pays: Government seeks feedback on climate change managed retreat
Photo credit: Supplied

The Bay of Plenty town of Matatā is a prime example. Much of the town 24 kilometres to the north-west of Whakatāne was relocated between the years 2006 and 2021 due to increased natural threats arising from climate change. 

It has come at a total cost of approximately $16.8 million and has caused years of stress and uncertainty for the community. It required cooperation and funding from Whakatane District Council, Bay of Plenty Regional Council and central government.

Given the scale of the issues - geographic, economic and social - the Government wants to step in and help but there are currently no dedicated tools or processes to guide how households or communities might permanently shift away from areas of intolerable risk.

That's where the National Adaptation Plan comes into play. The draft National Adaptation Plan has three focus areas:

  • Reform institutions to be fit for a changing climate
  • Provide data, information, tools and guidance to allow everyone to assess and reduce their own climate risks
  • Embed climate resilience across government strategies and policies

The Government's response begins with its reform of the Resource Management Act (RMA), the details of which were released in June last year

The Government announced plans to replace the clunky law blamed for holding back development due to its complexity, with three new laws this parliamentary term. The intention is to consolidate more than 100 RMA policy statements and regional district plans into about 14, simplifying national planning.

The Natural and Built Environments Act (NBA) will be the primary replacement for the RMA. Below the NBA will sit the Strategic Planning Act (SPA) and the Climate Adaptation Act (CAA), to address complex issues associated with managed retreat.

The CAA is intended to provide tools and processes to plan and implement managed retreats. For example, additional powers and processes will be needed to address issues of ownership of property that is withdrawn from. 

The Government is seeking feedback on how much it should intervene in managed retreat cases and how much central government should be involved. 

The Matatā experience highlighted the need for a national framework for managed retreat, with clearly defined roles and responsibilities for individuals, central and local government, national direction and changes to existing land use protections. 

What are the major concerns of managed retreat?

The Government is seeking feedback on property transfer and the implications that come with it, because managed retreat will require the transfer of land.

While planning rules can prevent certain at-risk areas of land being built on, the Government will need to consider things like access, rates, and ongoing management of the land, including responsibility and liability for harm caused by structures left on the land or inadequate clean-up of existing soil contamination.

The Government will also need to carefully consider Māori land acquired through Treaty settlement processes. Preventing the use of these lands could be viewed by Māori as land confiscation and a serious breach of Te Tiriti by the Crown. 

There's also insurance to consider. It plays an important role in supporting New Zealand's resilience and recovery from natural hazards. However, sea level rise and increasing extreme weather due to climate change are likely to affect the ability to insure assets, particularly residential buildings.

This may lead to 'insurance retreat' in some cases, which could include higher premiums and ultimately loss of access to insurance.

Climate Change Minister James Shaw.
Climate Change Minister James Shaw. Photo credit: Newshub

The Government has warned that insurers may limit their liability, or refuse future cover, if a property is highly likely to suffer similar damage again. Options for managed retreat may be limited if an insurer decides to manage repairs for a property. 

New Zealand's largest general insurer, IAG, has welcomed the draft National Adaptation Plan.

"Insurance is here to support kiwis when things go wrong, but there's so much more we need to be doing to keep New Zealanders safe from the impacts of natural disasters," said CEO Amanda Whiting.

"There are deliberate actions we can take to increase our resilience, alongside ongoing efforts to reduce carbon emissions. While we are pleased to see this important first step today, it's apparent there is still a lot we need to do as a country to get ahead of these issues and we welcome the opportunity to contribute to this plan.

"Insurance is one component of this solution. It is not the full answer.  The most important thing we can do is to ensure people are not in harm's way.  Avoiding the impact on lives and people's wellbeing must be the priority. 

"This requires greater investment in infrastructure and other solutions that either protect people or move them out of harm's way. We can help achieve this alongside central and local government."