13 August 2024

Paul Shelton
[FYI request #27361 email]

Dear Paul

Thank you for your Official Information Act request, received on 24 June 2024. You
requested:
Please send me any official information that Minister Willis has received on the
topic of uninsurability, insurance retreat, and rising insurance costs.
The request was extended by 15 working days on 16 July 2024 in order to undertake
consultations.
Information being released
Please find enclosed the following documents:
Item  Date
Document Description
Decision
1.
28 February 2024
Aide Memoire T2024/433 29 Feb Meeting
Release in part
with IAG
2.
7 March 2024
Aide Memoire T2024/593 Meeting with
Release in part
Insurance Council of New Zealand
3.
15 March 2024
Treasury Report T2024/77 Climate
Release in part
Adaptation - Priorities for Future Work
4.
29 April 2024
Cover briefing to RBNZ Report #6102
Release excerpt
Reserve Bank Financial Stability Report
May 2024

I have decided to release the relevant parts of the documents listed above, subject to
information being withheld under one or more of the following sections of the Official
Information Act, as applicable:
•
names and contact details of officials, under section 9(2)(g)(ii) – to maintain the
effective conduct of public affairs through protecting Ministers, members of
government organisations, officers and employees from improper pressure or
harassment,
•
advice still under consideration, under section 9(2)(f)(iv) – to maintain the current
constitutional conventions protecting the confidentiality of advice tendered by
Ministers and officials,
•
commercially sensitive information, under section 9(2)(b)(ii) – to protect
information where the making available of the information would be likely
unreasonably to prejudice the commercial position of the person who supplied or
who is the subject of the information,

•
information provided in confidence, under section 9(2)(ba)(i) – to protect
information which is subject to an obligation of confidence or which any person
has been or could be compelled to provide under the authority of any enactment,
where the making available of the information would be likely to prejudice the
supply of similar information, or information from the same source, and it is in the
public interest that such information should continue to be supplied,
•
direct dial phone numbers of officials, under section 9(2)(k) – to prevent the
disclosure of information for improper gain or improper advantage, and
•
Section 18(c)(i) – that the making available of the information requested would be
contrary to the provisions of a specified enactment.
Direct dial phone numbers of officials have been redacted under section 9(2)(k) in
order to reduce the possibility of staff being exposed to phishing, social engineering
and other scams. This is because information released under the OIA may end up in
the public domain, for example, on websites including Treasury’s website.
Information publicly available
The following information is also covered by your request and is or will soon be publicly
available on the websites listed:

Document
Excerpts
Links
Item
Date
Description
5.
22 February
RBNZ Report
Page 13 –
https://www.rbnz.govt.nz/-
2024
#6079 Bulletin
“Standardised
/media/project/sites/rbnz/files/publications/bulleti
article on the
Approach” –
ns/2024/rbb-2024-87-02.pdf
use of credit risk
First three
weights for
paragraphs
climate-related
purposes
6.
7 March 2024
RBNZ Report
Pages 9-11:
https://www.rbnz.govt.nz/-
#6080 Guidance
Paragraph 35
/media/project/sites/rbnz/files/regulation-and-
for prudentially
and Figure 3
supervision/climate/guidance-managing-climate-
regulated
related-risks.pdf
entities on
Page 17:
managing
Paragraphs
climate-related
68, 70
risks
Page 18:
Paragraphs
75-76, 79
Page 19:
Paragraph 82
7.
20 April 2024
RBNZ Report
SoI Page 13
https://www.rbnz.govt.nz/-
#6096 Draft
/media/project/sites/rbnz/files/publications/state
RBNZ
ments-of-intent/statement-of-intent-2024---
Statement of
2028.pdf
Intent 2024 –
2028 and

Statement of
Performance
https://www.rbnz.govt.nz/hub/publications/corpor
Expectations
ate-publications/statement-of-performance-
2024-25
expectations/statement-of-performance-
expectations-2024-to-2025

Document
Excerpts
Links
Item
Date
Description
8.
29 April 2024
RBNZ Report
Cover Report
Not publicly available – relevant excerpt from
#6102 Reserve
Page 2:
this Cover Briefing has been released as item 4
Bank Financial
Paragraph 6
in the table above.
Stability Report
May 2024

Financial
Stability
https://www.rbnz.govt.nz/-
Report Page
/media/project/sites/rbnz/files/publications/financi
20 – 26
al-stability-reports/2024/may-2024/fsr-may-
24.pdf
9.
20 March 2024
Treasury Report

Soon to be published at
T2023/1934
https://www.treasury.govt.nz/publications/search
Emerging
Insurance
challenges

Accordingly, I have refused your request for the documents listed in the above table
under section 18(d) of the Official Information Act:
•
the information requested is or will soon be publicly available.
In addition, some relevant information has been removed from documents listed in the
above table and should continue to be withheld under the Official Information Act, on
the grounds described in the documents.
Information to be withheld
There are additional documents covered by your request that I have decided to
withhold in full under the following section of the Official Information Act, as applicable:
•
advice still under consideration, section 9(2)(f)(iv) – to maintain the current
constitutional conventions protecting the confidentiality of advice tendered by
Ministers and officials.
Item
Date
Document Description
Proposed Action
10.
27 June 2024
Treasury Report T2023/2206 Insurance update
Withhold in full

In making my decision, I have considered the public interest considerations in section
9(1) of the Official Information Act.
This reply addresses the information you requested. You have the right to ask the
Ombudsman to investigate and review my decision.

Yours sincerely

Hon Nicola Willis
Minister of Finance

link to page 5 link to page 11 link to page 17 link to page 43 link to page 43 Table of Contents
1.
Aide Memoire T2024/433: 29 Feb Meeting with IAG
1
2.
Aide Memoire T2024/593: Meeting with ICNZ
7
3.
Treasury Report T2024/77: Climate Adaptation - Priorities for Future Work
13
4.
Excerpt - Cover Briefing to RBNZ Report 6102 Reserve Bank Financial Stability
39
Report May 2024

Page 1 of 39

Reference:
T2024/433
Date:
28 February 2024
To:
Minister of Finance
(Hon Nicola Willis)

Minister for Infrastructure
(Hon Chris Bishop)

Minister Responsible for EQC
(Hon David Seymour)

Deadline:
Thursday 29 February
(if any)
Meetings with IAG
IAG New Zealand (IAG) has sought separate introductory meetings with each of you.
The meetings with Minister Wil is and Minister Bishop are on Thursday 29 February
2024, and the meeting date with Minister Seymour is yet to be confirmed.
These representatives you will be meeting from IAG include:
•
Simon Al en, Chair
•
Amanda Whiting, Chief Executive
•
Bryce Davies, General Manager Corporate Relations

The objectives of these meetings are to:
•
establish relationships with IAG, and
•
discuss IAG’s framework for reducing natural hazard risk in New Zealand.

This briefing provides you with talking points and background information on:
•
IAG’s framework and climate change adaptation, and
•
insurance in New Zealand and Treasury’s current work.
We have also included some talking points on lessons from the response to the North
Island Weather events in case this is raised.

Page 2 of 39

Talking Points
IAG framework and climate change adaptation
•
Thank you for sharing with us the natural hazards risk reduction framework you
have developed, along with your earlier briefings. These are valuable inputs as
we progress our policy thinking.
•
The unprecedented scale of economic and fiscal impacts from the North Island
Weather Events reinforces the importance of New Zealand becoming more
resilient to similar future events.
•
Our Government is seeking advice on establishing a policy framework for climate
change adaptation. This framework seeks to build upon existing systems to share
the risks and costs of natural hazards and long-term environmental change.
•
Risks and costs will need to be shared between central and local government,
property owners and insurers. Building a consensus will be important for ensuring
policy settings endure. Ministers wil receive briefing on adaptation priorities
ahead of the planned Climate Priorities Ministerial Group meeting in early March.
•
We see insurance as a key part of an adaptation system in transferring risk and
creating market signals to reduce risk. We also recognise that one of the main
opportunities to adapt is through reducing underlying risk in a cost-effective way.
•
One priority for us is ensuring that high-quality information about risk is available
for decision makers to enable people to adapt effectively and efficiently.
What specific gaps do you see in the availability and quality of risk information for
individuals, communities and councils?
•
I am expecting to be briefed by my officials on climate change adaptation in the
next few weeks.
•
s9(2)(f)(iv)

-
s9(2)(f)(iv)

-
s9(2)(f)(iv)

-
s9(2)(f)(iv)

Page 3 of 39

Insurance in New Zealand
•
Uptake of residential insurance remains relatively high in New Zealand, despite
significant increases in premiums in recent years. What challenges do you
foresee to affordability and accessibility in the future?
•
I understand IAG is introducing greater risk-based pricing for the flood component
of its residential premiums. What impact wil this approach have on the
affordability and availability of insurance in New Zealand?
•
What is IAG hearing from international reinsurers - do you expect pressure on
reinsurance to reduce in the near future, and what would help give reinsurers
confidence in the New Zealand reinsurance market?
•
What do you think are the most promising innovations in the residential (or other)
insurance market?
Lessons learned from the North Island Weather Events
•
We are interested to hear IAG’s views on the response to and recovery from the
North Island Weather Events.
•
Initial lessons from the Treasury’s perspective are that:
-
Usable, high-quality information on natural hazard risk is important to
support cost-effective and consistent decision making about the response
and recovery, as well as how best to manage risk prior to events taking
place.
-
A local y-led approach has benefits as well as trade-offs. The NIWE
response was primarily local y-led and central y supported. While this
approach meant that responses could be tailored to the unique
circumstances of affected regions, it did risk inconsistency in approaches.
-
There are opportunities to make future recoveries faster and more effective
for the highest risk areas e.g. through clarifying ahead of time the roles,
responsibilities and powers of central and local government.
•
Work is underway to identify lessons learned from the North Island Weather
Events for future recoveries. It is being led by the Cyclone Recovery Unit.

Page 4 of 39

Background
IAG’s framework and climate change adaptation
At a high-level, we (officials) support what is proposed in IAG’s framework. We outline
a brief selection of our reactions below which you may wish to raise. We do not
comment here on each individual action suggested, given there are a large number.
We support:
•
the focus on cost-effective, targeted actions made by those in the best position to
reduce risk
•
the emphasis on decision-makers being wel -informed and incentivised to reduce
risk
•
the focus on actors having access to data and models needed to reduce risk, and
•
the suggestions to improve council powers to limit development in at-risk areas
and to improve national guidance.
We would be interested to understand from IAG what specific gaps they see in the
availability and quality of risk information for individuals, communities, and councils.
s9(2)(f)(iv)

Insurance in New Zealand and Treasury’s current work
The Treasury is responsible for advice on the functioning of insurance markets,
administers the Natural Hazards Insurance Act, and monitors ACC, EQC - Toka Tū
Ake (EQC), and Southern Response (the government-owned company responsible for
settling claims by AMI policyholders for Canterbury earthquake damage).
In our role advising on the functioning of insurance markets we have tended to focus
on residential insurance. This is because of the importance of housing to
New Zealanders (including as a place to live and that in New Zealand a significant
amount of household wealth is tied up in people’s homes), meaning the benefits of
residential insurance are particularly pronounced.

Page 5 of 39

Characteristics of the residential insurance market in New Zealand include:
•
High uptake while uptake data is relatively limited, the most recent available
surveys suggest it is high: initial analysis of the Household Economic Survey
reports 84%, while the Insurance Council of New Zealand annual survey reports
95%. This implies residential insurance remains affordable for and available to
most people. It also reflects the fact that a residential insurance policy is required
for mortgage lending and that many insured risks have been ‘community-rated’
(i.e. the costs are shared evenly rather than reflecting individual or localised risk
profiles).
•
Increasing premiums: s9(2)(f)(iv)

These increases have been
driven by a range of factors including increasing construction costs (due in part to
COVID-related supply chain disruptions) and higher reinsurance costs.
Looking ahead, premiums may also face pressure from the shift to greater risk-
based pricing and increases in underlying risk caused by climate change.
Over time, pricing pressures may result in lower uptake.
•
High market concentration: New Zealand’s residential insurance market is
concentrateds18(c)(i)

•
Use of all perils policies: residential insurance policies in New Zealand
generally cover al key risk/perils (e.g. fire, flood, storm, earthquake, tsunami, and
volcanic) rather than offering cover for these separately. New Zealand is unusual
in having this approach. In other markets (e.g. Australia and USA), insurers
unbundle perils as an alternative to ceasing to underwrite high-risk locations.
•
Annual contracts: insurance contracts are general y for 1-year periods, meaning
that insurers can adjust terms (including price) or cease offering insurance
annually.
•
Government involvement: the government directly supports residential
insurance through the EQC scheme, a key rationale for which is to encourage the
uptake of insurance for residential buildings given the potential for non-insurance
to create a material implicit fiscal risk. EQC cover is attached to the purchase of
residential insurance, meaning if insurance becomes unavailable for some
reason, an individual generally no longer has standard earthquake cover from
EQC.

1

s9(2)(f)(iv)

Page 6 of 39

Treasury’s current work on residential insurance:
•
Market monitoring: as part of our insurance policy work we carry out insurance
price and availability monitoring. We do this mainly through a contract with Finity
Consulting which provides quarterly updates by gathering online quotes for a
static set of addresses. We are also currently running a survey on apartment
insurance pricing and availability as apartments are not captured in the Finity
monitoring. We are currently preparing advice for the Minister of Finance on the
findings from this monitoring work.
•
Risk-based pricing: insurers in New Zealand are adopting greater risk-based
pricing for some risks (e.g. flood risk), enabled by an improved understanding of
risk and better systems. While positive from a risk management and climate
change adaptation perspective, greater use of risk-based pricing may pose
insurability chal enges for homeowners in high-risk areas. We are currently
preparing advice for the Minister of Finance on this topic.

Lisa Davies, Senior Analyst, Financial Markets, s9(2)(k)
Mary Llewel yn-Fowler, Team Leader, Financial Markets, s9(2)(k)

Page 7 of 39
IN-CONFIDENCE

Reference:
T2024/593

Date:
7 March 2024

To:
Minister of Finance
(Hon Nicola Willis)

Deadline:
2pm, Tuesday 12 March
(if any)

Meeting with Insurance Council of New Zealand
This briefing supports your upcoming meeting with the Insurance Council of
New Zealand (ICNZ) at 2pm on Tuesday 12 March 2024.
The main objectives of this meeting are to establish a relationship with ICNZ and to
hear what is top of mind for the insurance sector.
ICNZ was established in 1895 to represent fire and general insurance companies.
Its members underwrite around 95% of New Zealand’s general insurance market,
accepting the risks of over $1 trillion of New Zealand’s assets and liabilities.
The Council also performs an important role in informing and educating consumers
about key insurance issues and risks and is often in the media.
The representatives you will be meeting from ICNZ include:
•
Tim Grafton, the outgoing Chief Executive (finishing this month after almost
12 years in the role), and
•
Kris Faafoi, the incoming Chief Executive.
We understand from ICNZ that they may raise issues covered in their Briefing to the
Incoming Minister (attached), particularly those relating to improving resilience
(BIM pp. 11-14). In light of this, this briefing provides you with talking points on:
•
Adaptation and resilience
•
Affordability, availability and innovation
•
Lessons learned from the North Island Weather Events (NIWE)
•
Capital requirements (if raised)

Treasury:4930074v1
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1

Page 8 of 39
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•
Progress with the Natural Hazards Insurance (NHI) Act (if raised – noting
ICNZ have already shared their concerns about progress with Minister
Seymour who as Associate Minister for Finance has delegated
responsibility for this work).
It also provides background information on insurance matters.
Talking Points
Adaptation and resilience
•
The unprecedented scale of economic and fiscal impacts from the North Island
Weather Events reinforces the importance of New Zealand becoming more
resilient to similar future events.
•
We see insurance as a key part of an adaptation system in transferring risk and
creating market signals to reduce risk.
•
Beyond insurance, the government has a key role in ensuring that people have
the incentives and the ability to manage underlying risk - for example, through
building flood resilience, land-use planning and retreating.
•
We are currently working on an adaptation framework. As such, we welcome the
suggestions in your BIM for how government and insurers can work together to
prepare for the impact of climate change and look forward to engaging further on
these.
•
In particular, we agree that it is important for decision-makers to have good
information about risk and are interested in your ideas about better col aboration
between government and insurers on this. What specific gaps do you see in the
availability and quality of risk information for individuals, communities and
councils?
•
[If central government investment in local flood resilience is raised, you may wish
to note that]:
•
The government sees local government as having primary responsibility for
managing natural hazard risk at a community level.
•
However, we also appreciate that some councils face both acute climate
risk and financial capacity pressures.
•
As part of developing an adaptation framework, we wil consider the cost
sharing arrangements between central and local government.
Affordability, availability and innovation
•
Uptake of residential insurance remains relatively high in New Zealand, despite
significant increases in premiums in recent years. What challenges do you
foresee to affordability and accessibility in the future?
Treasury:4930074v1
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2

Page 9 of 39
IN-CONFIDENCE
•
I understand insurers are introducing greater risk-based pricing for the flood
component of its residential premiums. What impact wil this approach have on
the affordability and availability of insurance in New Zealand?
•
What are insurers hearing from international reinsurers - do you expect pressure
on reinsurance to ease in the near future, and what would help give reinsurers
confidence in the New Zealand reinsurance market?
•
What do you think are the most promising innovations in the residential (or other)
insurance market and are there any barriers to adopting these in the
New Zealand context?
Lessons learned from the North Island Weather Events
•
We are interested to hear ICNZ’s views on the response to and recovery from the
North Island Weather Events.
•
Initial lessons from the Treasury’s perspective are that:
-
Usable, high-quality information on natural hazard risk is important to
support cost-effective and consistent decision making about the response
and recovery, as well as how best to manage risk prior to events taking
place.
-
A local y-led approach has benefits as well as trade-offs. The NIWE
response was primarily local y-led and central y supported. While this
approach meant that responses could be tailored to the unique
circumstances of affected regions, it did risk inconsistency in approaches.
-
There are opportunities to make future recoveries faster and more effective
for the highest risk areas e.g. through clarifying ahead of time the roles,
responsibilities and powers of central and local government.
•
Work is underway to identify lessons learned from the North Island Weather
Events for future recoveries. This is being led by the Cyclone Recovery Unit.
Capital and reinsurance requirements [if raised]
[ICNZ may bring up the capital/reinsurance requirements that insurers are regulated to
hold. Insurers are regulated to hold sufficient capital or reinsurance to meet claims from
a 1:1000 year earthquake occurring anywhere in the country. This requirement is
higher than other countries and the ICNZ would like it to be reviewed].
•
I note the point in your BIM that the RBNZ’s capital requirements impact the cost
of insurance premiums.
•
The purpose of the 1-in-1000 seismic risk capital requirement is to contribute to
NZ’s financial stability by ensuring that the insurance industry is able to pay
claims in the aftermath of a major earthquake.
Treasury:4930074v1
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Page 10 of 39
IN-CONFIDENCE
•
The RBNZ wil  be reviewing and consulting on this over the next two years,
as part of the review of its solvency standards.
Implementation of the NHI Act regulations [if raised]
•
I understand that finalising the NHI Act regulations and instruments as quickly as
possible is an important priority in order to provide certainty for the insurance
industry ahead of commencement on 1 July 2024.
•
When you met Minister Seymour on 14 February 2024, he undertook to do what
he could to expedite the regulation-making. He has also expedited the proactive
release of the latest Cabinet policy paper on the regulations. This was recently
published on the Treasury website and will hopeful y assist insurers as they plan
for implementation.
Background on insurance matters
Responsibility for advising on and regulating insurance is shared across the public
sector:
•
The Reserve Bank of New Zealand provides advice on financial stability and is
the prudential regulator.
•
The Ministry of Business, Innovation and Employment provides advice on
conduct and competition policy, and monitors the conduct and competition
regulators (the Financial Markets Authority and Commerce Commission).
•
The Treasury provides advice on the functioning of insurance markets,
administers the Natural Hazards Insurance Act, and monitors ACC, EQC - Toka
Tū Ake (EQC), and Southern Response (the government-owned company
responsible for settling claims by AMI policyholders for Canterbury earthquake
damage).
These agencies coordinate activity at the working level as wel  as via the Council of
Financial Regulators which holds regular meetings to discuss regulatory issues,
risks and priorities for financial markets, as wel  as quarterly fora with representatives
of the insurance sector.
Residential insurance in New Zealand
In our role advising on the functioning of insurance markets, the Treasury has tended
to focus on residential insurance. This is because of the importance of housing to
New Zealanders (including as a place to live and that in New Zealand a significant
amount of household wealth is tied up in people’s homes2), meaning the benefits of
residential insurance are particularly pronounced.

Treasury:4930074v1
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4

Page 11 of 39
IN-CONFIDENCE
Characteristics of the residential insurance market in New Zealand include:
•
High uptake: while uptake data is relatively limited, the most recent available
surveys suggest it is high: the Household Economic Survey reports 84% while
the Insurance Council of New Zealand annual survey reports 95%. High uptake
implies residential insurance remains affordable for and available to most people.
It also reflects the fact that a residential insurance policy is required for mortgage
lending and there is relatively high ‘community-rating’/cross-subsidisation (i.e. the
costs are shared evenly rather than reflecting individual or localised risk profiles)
for key risks – for example EQC premiums do not differ across the country
despite earthquake risk varying. Nevertheless, uptake may be lower in some
communities and locations, including those subject to high flood risk.
•
High market concentration: New Zealand’s residential insurance market is
concentrated in three insurers s18(c)(i)
•
Use of all perils policies: residential insurance policies in New Zealand
generally cover al key risk/perils (e.g. fire, flood, storm, earthquake, tsunami, and
volcanic) rather than offering cover for these separately. Unbundling of perils as
an alternative to ceasing to underwrite high-risk locations is more common in
other market (e.g. USA).
•
Annual contracts: insurance contracts are general y for 1-year periods, meaning
that insurers can adjust terms (including price) or cease offering insurance
annually.
•
Government involvement: the government directly supports residential
insurance through the EQC scheme, a key rationale for which is to encourage the
uptake of insurance for residential buildings given the potential for non-insurance
to create a material implicit fiscal risk. EQC cover is attached to the purchase of
residential insurance that includes fire insurance, meaning if insurance becomes
unavailable for some reason, an individual general y no longer has standard
earthquake cover from EQC.
Treasury’s current work on residential insurance
Market monitoring
As part of our insurance policy work we carry out insurance price and availability
monitoring. We do this mainly through a contract with Finity Consulting which provides
quarterly updates by gathering online quotes for a static set of addresses. We are also
currently running a survey on apartment insurance pricing and availability as
apartments are not captured in the Finity monitoring. We are currently preparing advice
for you on the findings from this work.

Treasury:4930074v1
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5

Page 12 of 39
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Emerging insurance challenges: risk-based pricing
Globally, reinsurance has become more expensive and harder to access over recent
years. This is a result of considerable losses from a range of hurricanes, typhoons,
floods, storms, and wildfires, alongside the COVID-19 pandemic and the war in
Ukraine. In New Zealand, insurers are needing to pay more for cover and retain more
risk for non-earthquake perils.
Against this backdrop, insurers in New Zealand are adopting greater risk-based pricing
for some risks, supported by an improved understanding of risk (due to better flood
data and modelling) and better systems (including IT systems). While positive from a
risk management and climate change adaptation perspective, greater use of risk-based
pricing may pose insurability challenges for homeowners in high-risk areas. We are
currently preparing advice for you on this topic.
Lisa Davies, Senior Analyst, Financial Markets, s9(2)(k)
Mary Llewel yn-Fowler, Team Leader, Financial Markets, s9(2)(k)
Treasury:4930074v1
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Page 13 of 39

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Treasury Report:   Climate Adaptation: Priorities for Future Work
Date:
15 March 2024
Report No:
T2024/77
File Number:
SH-10-8
Action sought

Action sought
Deadline
Hon Nicola Willis
Provide feedback to the Minister of  21 March 2024
Minister of Finance
Climate Change on the draft Cabinet

Paper on an adaptation framework,
(draft feedback is provided in
Appendix One).
Refer this report to Minister of
Climate Change
Contact for telephone discussion (if required)
Name
Position
Telephone
1st Contact
Tom Wilson
Senior Analyst, Climate  s9(2)(k)
s9(2)(g)(ii)

Change
Nicky Lynch
Manager, Climate

Change
Minister’s Office actions (if required)
Return the signed report to Treasury.

Note any

feedback on
the quality of
the report

Enclosure:
No
Treasury:4985691v1
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Page 14 of 39
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Treasury Report:  Climate Adaptation: Priorities for Future Work
Executive Summary
The Minister of Climate Change will shortly seek your feedback on a draft Cabinet Paper
proposing an adaptation work programme. This report provides our general advice on
adaptation priorities and then draws on those views to suggest feedback on the draft Cabinet
Paper.
Adaptation needs to be lifted in the policy agenda. We think this is necessary because
climate change is likely to present a unique and serious challenge.
•
While the scale of impact is uncertain and will depend on global emissions, the trend is
clear. Climate change will exacerbate costs from climate extremes such as floods and
droughts and wil  drive long term change such as sea level rise or economic
adjustment costs in sectors such as agriculture, fisheries, or tourism.
•
Because New Zealand's contribution to global emissions is very small, the main way
we can manage these costs is by adapting.
•
Costs are likely to be pervasive across the economy and society, and the scale of fiscal
costs could threaten our long-term fiscal sustainability.
•
Existing systems to manage natural hazard risks face regulatory and market failures
that limit their effectiveness in enabling adaptation.
•
To date, central government has made limited progress on core policy choices.  In our
view this reflects the complexity of the issues and the greater effort directed at
mitigation policy than adaptation. Yet, central government’s choices can make a major
difference to economic, fiscal, and social costs to New Zealand.
We suggest a set of principles and priorities. s9(2)(f)(iv)
T2024/584 Climate Adaptation: Priorities for Future Work
Page 2
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Page 15 of 39
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s9(2)(f)(iv)
Recommended Action
We recommend that you:
a
provide feedback to the Minister of Climate Change on the draft Cabinet Paper on an
adaptation work programme, as outlined in Appendix One.

b
note that Treasury is currently focussed on monitoring insurance markets, managing
the capital investment system at Budget, supporting your participation in cross-
government adaptation discussions, and integrating adaptation into wider fiscal and
economic advice.

c
indicate if you would like the Treasury to focus on additional or different areas.

d
refer to the Minister of Climate Change

Refer/not
referred.

Nicky Lynch
Manager, Climate Change

Hon Nicola Willis
Minister of Finance

_____/_____/_______
T2024/584 Climate Adaptation: Priorities for Future Work
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Treasury Report: Climate Adaptation: Priorities for future work
Purpose of Report
1.
The Minister of Climate Change will shortly share a draft Cabinet Paper with you
on an adaptation work programme. This report supports you to respond to the
draft paper and engage on this work. This report covers:
a
context, including the proposed adaptation work programme and the
adaptation policy problem
b
an explanation of why, in our view, adaptation needs stronger focus within
central government
c
our first-best advice on principles and priorities for progressing adaptation
d
suggested feedback on the draft Cabinet Paper, focussed on where the
paper could be more aligned with our advice (our feedback is in Appendix
One).
Context
The Minister of Climate Change is seeking agreement to an adaptation work
programme.
2.
We prepared this report on the understanding that the draft Cabinet Paper on the
adaptation work programme would be circulated to Ministers for consultation on
Tuesday 12 March, with the aim of lodging the paper in time for ECO on March
27th.
3.
We understand the draft Cabinet Paper has not yet been circulated for
consultation but wil  be soon.
4.
We are providing this advice now to give you an overview of adaptation issues
from a Finance Portfolio perspective, and because the feedback may be helpful
for the Minister of Climate Change to be aware of (if referred).
5.
If the draft Cabinet Paper changes further, we can provide updated short briefing
to you as required.
6.
The draft Cabinet Paper proposes an ‘adaptation framework’, which is essentially
a work programme for the following seven months. It proposes four workstreams
for officials, a Ministerial Advisory Group, and a Select Committee inquiry.
7.
The inquiry would deliver a final report in September 2024  s9(2)(f)(iv)

8.
The purpose is “to initiate work to develop an adaptation framework to provide
stable and predictable policy settings so that markets and individuals have the
incentives and ability to manage risk”.
9.
The ongoing work is to be guided by the following objectives:
a
minimise total cost
b
improve climate risk and response information flows
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c
support market efficiency
d
uphold the principles of Te Tiriti o Waitangi
e
enable a fair transition.

What is the adaptation policy problem?
10.  Climate change adaptation (‘adaptation’) is a process of adjustment to future
climate conditions, to moderate harm or take advantage of opportunities1.
Climate change is:
a
increasing the risk of acute extreme weather such as floods and droughts
beyond what they otherwise would have been
b
changing long-run climate environmental conditions, disrupting human
economic and social activity (e.g. higher sea levels, or economic
adjustment costs in sectors such as agriculture, fisheries or tourism).
11.  It may not be possible or cost-effective to fully avoid al  costs. But insufficient
action to reduce risk will have considerable impacts.
a
Fiscal costs are likely to be big enough to challenge long-term fiscal
sustainability.
b
Negative economic impacts are likely to significantly exceed any economic
benefits.
c
Financial and non-financial impacts for individuals are likely to be
significant.
12.  The size and distribution of these costs wil  depend on the extent of international
emissions reductions and New Zealand’s own adaptation policy choices.
13.  Not al  climate change impacts wil  be negative, for example, some crop yields
may increase. However, this report focusses on the negative physical impacts of
climate change, because they are expected to exceed benefits2.
14.  Adaptation can take many forms (Figure 1), but not al  adaptation benefits exceed
costs. Adaptation wil  be effective and efficient where the costs of action in the
short term are outweighed by avoided costs later. The objective is not to
eliminate risk, but to reduce it to a level considered acceptable3.
15.  Adaptation is challenging for multiple reasons.
a
Underlying risk is increasing over time. This means assets originally built in
a lower risk environment can later face higher risk, disrupting land and
insurance markets.
b
In addition to increased risk due to climate change, risk increases as the
number and value of assets increases over time.
c
Adaptation lacks clearly quantifiable targets, unlike mitigation4.

1 As defined in the New Zealand National Adaptation Plan 2022.
2 OECD (2015). Swiss Re (2021) estimates global GDP 11-18% lower by 2050 due to climate physical impacts.
3 We use the term ‘acceptable’ to refer the perception of tolerable risk. What is considered tolerable will vary from
person to person and will also vary over time. For example, risk tolerance often decreases after major disasters.
4 IAG has suggested that adaptation is sufficient when post-event recovery costs do not grow faster than the economy.
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d
Uncertainty over the size of impacts across long time scales (to 2100 and
beyond) can make cost-benefit judgements difficult. Waiting for more
information (option value) can sometimes be a cost-effective option.
e
Adaptation costs compete with other financial pressures facing councils,
firms, Iwi and individuals, and the Crown (including other long-term risks to
fiscal sustainability such as health and superannuation costs).

Who is responsible for adaptation?
16.  Central government, councils, insurers, and individuals all have an interest in
adaptation. Many of the levers sit within existing systems. Figure 1 summarises
the main actors, policy levers and existing systems where adaptation occurs.
17.  The Climate Change Response Act 2002 requires the Minister of Climate Change
to prepare a National Adaptation Plan (NAP) every six years. The first NAP was
published in 2022. The Climate Change Commission (CCC) is responsible for
six-yearly National Climate Change Risk Assessments. The CCC also evaluates
the implementation of the NAP every two years, with the first review in mid-2024.
18.  Within central government, responsibility for adaptation actions sits within
multiple portfolios, limiting the value of a ‘lead agency’ approach. However, an
effective coordination function is important (the Ministry for the Environment
performs this function).
19.  The Treasury is currently focussed on the adaptation-related areas of monitoring
insurance markets and managing the capital investment system at Budget. We
also support your participation in cross-government discussions, and we have
integrated adaptation into fiscal and economic analysis such as the 2021 Long
Term Fiscal Statement and 2023 Climate Economic and Fiscal Assessment.
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Figure 1: Summary of actors, policy levers, and existing systems responsible for managing the physical impacts of climate change.
Actors
Individuals, groups, and firms
Insurers
•  Manage property-level risk, for example, where to buy or develop property, or
•  Smooth the costs of unpredictable events over time and over the population.
whether to install drainage or retaining walls.
•  Iwi/Māori often act collectively, with special rights and interests as Treaty partners.
Central government
•  Resolves national market failures when it provides national infrastructure, legal
Councils
frameworks such as resource management, data, and the EQC scheme.
•  Regional councils and territorial local authorities (‘councils’) have statutory
•  Addresses equity/hardship – e.g. supporting councils with 60% of post-event
responsibility for natural hazard risk and land use planning.
reconstruction of essential infrastructure, and providing additional discretionary
•
support to councils, businesses and individuals after overwhelming events
  Resolve local market failures when they fund and finance local public goods (e.g.
(examples have included buy outs and temporary accommodation).
flood protection from rates, targeted rates or debt), when they provide local risk
information (e.g. in Land Information Memoranda) and through land use planning
•  Sets broader labour, capital, land, innovation and trade policies that can support the
(e.g. district plans).
reallocation of resources in response to long term environmental change.

Policy levers5

Existing systems where levers sit
Avoid

Resource management system for land use planning
•  e.g. planning rules to prevent new development in high-
Infrastructure system including Crown and council capital expenditure, private suppliers.
risk locations (or in extreme cases, retreat).
Insurance system including private insurance and EQC.
Control:
Emergency management system
•  e.g.  council  flood  protection  or  drainage,  home  raising,
flood proofing homes.
Council funding and finance system through rates, targeted rates and debt.
Transfer:
Crown fiscal strategy including debt buffers.
•  e.g. purchasing insurance
Research and science system, both public and private.
Building system including councils’ powers over building consents, or building access, due to hazard risk.
Accept.
•
Other systems that will likely face climate related pressure including biosecurity and health
  e.g. improving emergency response capability.

5 The insurance industry and NZIER use the ‘ACTA’ framework above while some councils and government agencies use a similar Protect-Avoid-Retreat-Accommodate ‘PARA’. We prefer ACTA because it includes
insurance (transfer) and acceptance, however we wil  work with other agencies to agree a common framing for future advice.
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Why adaptation needs a stronger focus within central government
Climate change presents a unique challenge.
20.  While the scale of impact is uncertain and will depend on global emissions, the
trend is clear. Climate change will exacerbate costs from climate extremes such
as floods and droughts and wil  drive long term change such as sea level rise or
the economic adjustment costs in sectors such as agriculture, fisheries and
tourism. Because New Zealand's contribution to global emissions is very smal 6,
the main way we can manage these impacts is by adapting.
21.  Climate change impacts are likely to be pervasive across the economy and
society and the scale of fiscal costs could threaten our long-term fiscal
sustainability.
22.  While we cannot avoid physical climate change, there are many choices central
government and other actors can take to adapt effectively. This has the potential
to make a major difference to economic, fiscal and social costs to New Zealand.

The Government’s fiscal position has been resilient to natural hazard events in
the past, but future costs will be more difficult to manage due to more frequent
climate extremes, greater use of retreat, and insurance market changes.
23.  In this section we focus on fiscal costs fol owing disaster events because those
costs can be most easily isolated. Appendix Two describes the broader range of
costs, both pre-event and post event, and recent examples. Appendix Three
provides examples of economic and fiscal costs from the 2023 North Island
Weather Events (NIWE).
24.  In most years New Zealand has experienced multiple natural hazard events but
with a modest fiscal impact in aggregate. For example, the average yearly cost of
meeting the Crown’s standing cost sharing commitments for state of emergency
events between 2017 and 2022 (excluding for roading) was about $3.7m.
25.  Occasionally, overwhelming events have seen the Crown use its discretion to
provide significant additional support to councils, and asset owners. These costs
are met through borrowing using the Crown’s debt buffer. Examples in recent
history include:
a
2010/11 Canterbury earthquakes (approx. $20b direct net cost to the
Crown)7
b
2016 Kaikoura earthquakes (approx. $2 - 3b direct net cost to the Crown)8
c
2023 NIWE ($4.7b allocated to date), unprecedented for extreme weather
events in terms of fiscal impact.
26.  These major events have been large enough to influence fiscal indicators
(OBEGAL and net debt) and economic indicators (GDP) but not large or frequent
enough to challenge long term fiscal sustainability9. Successive governments’

6 New Zealand accounts for about 0.17% of global gross emissions.
7 Based on 2017 Treasury analysis of total net costs to the Crown from the earthquakes combined with updated
estimates of EQC costs as at December 2021.
8 Treasury HYEFU 2016
9 We use the term fiscal sustainability to mean that existing policy settings are fiscal y sustainable into the foreseeable
future. That is, under existing policy settings, the government’s fiscal position is not imposing a deteriorating debt or
net worth trajectory that will at some future point force a fiscal correction.
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commitment to medium-term sustainability, through building fiscal buffers, has
enabled resilience to fiscal shocks.
More frequent climate extremes
27.  Based on our 2021 model ing, summarised in Box 1, we consider that larger and
more frequent extreme weather events wil  contribute significantly to long term
challenges to fiscal sustainability.
Box  1:  Treasury  modelling  of  fiscal  impacts  of  increasing  risk  from  weather
events
The  median  simulation  from  our  2021  il ustrative  model ing  of  more  severe  and
frequent  storms/floods  and  droughts10  showed  the  fiscal  pressure11  from  central
government contributions increasing by 0.54 percentage points of GDP by 2061 (from
an assumed baseline of 0% in 2021).
To put this number into context, over the same period the model ed fiscal pressure
from  superannuation  costs  would  increase  by  2.7  percentage  points  of  GDP  and
health would increase by 3.7 percentage points of GDP.
The modelling also included estimates of impacts on  net debt and GDP based  on
further assumptions about the mix of debt and tax that future governments would use
in response to climate change costs. The median simulation saw net debt increase
by 3.77% of GDP and GDP reduce by 1.9% by 2061.
We emphasise that the above figures are scenarios only and are not forecasts. Our
judgement is that the scenario costs are likely to be an underestimate because they
exclude the impacts of sea level rise or temperature change.
28.  New Zealand also faces other large hazard risks. Earthquakes have historically
caused far greater fiscal and economic costs than climate extremes and will
continue to present a significant risk. Appendix Four compares climate related
risks to non-climate hazard risks.
Greater use of retreat as a policy lever
29.  Analysis by the National Institute of Water and Atmosphere (NIWA) suggests that
sea level rise of 30 cm (expected between 2045 and 2070) would expose an
additional 20,000 buildings, with a replacement value of $6 bil ion, to risk of
coastal flooding12. If land values and other hazards are included, then this figure
will increase. We note that these values represent value-at-risk rather than actual
properties where retreat is deemed necessary, and do not account for routine
infrastructure renewal.
30.  Insurability could itself become a trigger for retreat. One study estimates that
10,000 coastal properties in Auckland, Wel ington, Christchurch and Dunedin
could become uninsurable by 2050 due to coastal flooding13. If acquisition was
the policy response, then the cost would be in the order of $10 billion at current
capital values. The cost would be higher if river flood risk was included.

10 The return period of severe droughts was increased from 20 years to 7 years, and the impact of 10-year storms and
floods was increased from 0.2% capital stock destroyed to 2% of capital stock destroyed, the latter approximately
equivalent to the impact of the 2010-11 Christchurch earthquakes.
11 We use the term fiscal pressure to mean the size of costs (e.g. capital damage) assumed to fall to Crown, separate
from other parts of the model that made further assumptions on how the Crown would respond through borrowing, tax,
or reduced spending elsewhere.
12 This is additional to the estimated $12.5 bil ion replacement value of buildings already exposed.
13 Storey et al (2020), based on an assessment that insurers will cease cover when coastal flood magnitudes that
previously had a 1-in-100-year frequency increase to a 1-in-20-year frequency.
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31.  Ultimately, the fiscal implications for the Crown from retreat will depend on the
speed of climate change and future policy choices on who pays, but the costs
could be challenging in the context of wider fiscal pressures.
Changes to insurance markets and associated implicit fiscal risk
32.  Insurers have shifted or will soon be shifting to greater risk-based pricing,
particularly for the flood risk component of residential insurance premiums. This
will result in premium increases in the highest risk locations and possibly the
withdrawal of cover. The shift to greater risk-based pricing wil  be exacerbated by
climate change unless natural hazard risk is reduced or managed.
33.  Our separate forthcoming advice wil  cover this issue in more detail. In short,
however, while the shift to greater risk-based-pricing can send a helpful price
signal on the risk facing policy holders – and therefore help support adaptation –
it may reduce living standards for homeowners in high-risk areas. In turn, this
could cause pressure on the Crown to support insurability or to assist uninsured
people fol owing weather events. This pressure could materialise before the
government has confirmed its approach to adaptation policy more broadly.
34.  The fiscal implications for the Crown wil  depend on future policy choices.
However, we note that policy responses in other jurisdictions have led to
significant fiscal impacts (e.g. Cyclone Re-insurance Pool in Australia, which is
supported by an annually-reinstated AUS $10 bil ion government guarantee).

s9(2)(f)(iv)

Existing systems to manage natural hazard risk face significant regulatory and
market failures.
38.  As described in Figure 1, the natural hazards systems seek to resolve local and
national market failures, balancing efficiency and equity.
39.  However, several residual regulatory15 and market failures are creating sub-
optimal outcomes within this system. We briefly summarise these below.

14 The overall cost of buyouts to the Crown is larger than this share, since achieving an agreed negotiated package with
councils involved the Crown committing to co-fund other activities that it may not otherwise have supported. The
Crown contributed approximately $500 million toward the buyouts but in addition provided an additional $495 million
for transport projects and $647.5 million for flood resilience projects.
15 We use the term regulatory failure to mean public actions, intended to correct market failures, that fail to recognise
other market failures or fail to achieve their goals.
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Regulatory failures
•  Development  in  high-risk  areas.  There  is  increasing  anecdotal  evidence  that
councils have permitted some new development or intensification in very high-risk
areas, leading to poor outcomes for asset owners and increased implicit fiscal risk
to the Crown. In other cases, new development has worsened flood risk downstream
(unaddressed externality). We understand councils’ attempts to restrict development
are easily challenged under the Resource Management Act by developers or other
groups. We do not have information on the scale of this problem nation-wide.
•  Uncertainty  over  who  will  decide  and  pay  for  retreat.  Councils  have  some
powers to enact retreat in response to natural hazard risk via changes to land use
under  the  Resource  Management  Act  but  these  are  not  wel   set  up  for  retreat,
particularly  post-event.  Councils  can  also  use  the  Local  Government  Act,  or
purchase  property  under  Public  Works  Act  (e.g.  to  build  a  stop  bank).  However,
these three avenues rely on acquisition (taking ownership) for which councils lack
resources. Councils also lack administrative tools and capacity to carry out retreat.
•  Council affordability. Some councils say they cannot afford to build, maintain or
upgrade  local  risk  management  infrastructure  such  as  flood  protection  from  their
rates, targeted rates and debt. We do not have good information on the scale of this
issue. s9(2)(f)(iv)

•  Moral  hazard  from  central  government’s  discretionary  support.  See  above
section on the increasing case for a clearer split of post-event recovery costs.
Market failures
•  Equity, hardship from moves to risk-based insurance pricing. As noted above,
risk-based pricing could reduce insurance uptake, with possible hardship or other
equity impacts.
•  Information failure from lack of data or myopia. Councils’ data on future natural
hazard risks at the local level appears to be patchy and does not always account for
increasing risk from climate change. Insurance contracts typically reflect short-term
risk (within the 12-month period of the policy) based on backward locking data, rather
than the longer-term risks presented by climate change data and information may
also be overly discounted by property market participants for example due to wider
housing supply constraints (myopia).
Recent  actions  to  improve  information  includes  legislation  to  ensure  Land
Information Memoranda (LIMs) provide nationally consistent and easily understood
natural hazard information to property buyers16.
Central government has made limited progress on core policy choices.
40.  Central government has undertaken work on adaptation in recent years, including
the release of the National Adaptation Plan 2022 (NAP). This includes new
legislation on climate related financial disclosures and the improved hazard
information in LIMs. A new Cabinet circular requires agencies to consider
resilience in asset management and capital investment (CO (23) 9). In 2023
public consultation took place on retreat and on national direction to target
development at lower risk locations.
41.  s9(2)(f)(iv)
It has been difficult to make progress on core questions like the
role of central versus local government, and who will decide and pay for retreat,
because the levers for change sit across multiple portfolios that each face other
priorities (Figure 1).

16 The Local Government Official Information and Meetings Amendment Bill 2022. Led by the Department of Internal
Affairs.
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42.  Within the wider climate policy agenda, the strong legislative requirements that
now exist under the Climate Change Response Act have created a clear
incentive for government to ensure adequate plans are in place on mitigation.
Adaptation as a problem does not lend itself so wel  to a targets-based approach,
and consequently the incentive to prioritise adaptation is less strong.
43.  Central government should retain option value in the face of uncertain future
climate impacts.  s9(2)(f)(iv)

Making progress on adaptation
Our first-best advice on adaptation principles and priorities
s9(2)(f)(iv)

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s9(2)(f)(iv)

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s9(2)(f)(iv)
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s9(2)(f)(iv)
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s9(2)(f)(iv)
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s9(2)(f)(iv)
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s9(2)(f)(iv)
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s9(2)(f)(iv)
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s9(2)(f)(iv)
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s9(2)(f)(iv)
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s9(2)(f)(iv)

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Appendix Two: Sources and channels of cost from the physical
impacts of climate change
Table 1: Sources and channels of cost from the physical impacts of climate change17
Sources

Channels
Acute  natural  hazard  costs:  the  costs  of
Fiscal channels. Direct impacts on revenue
adaptation  actions  before  acute  events
and  expenses  such  as  repair  of  Crown
(‘pre-event’)  or  the  costs  of  repairing  or
infrastructure, or indirect impacts such as
recovering  after  acute  events  (‘post-
increased  borrowing  costs.  We  provide
event’).  Noting  that  pre-event  costs  can
examples below.
reduce post-event costs.
Chronic environmental change costs.  The
Economic  channels.  Demand  side  costs
costs  of  adjustment  before  long  run
such  as  reduced  consumption,  or  supply
changes occur, or the costs of adjustment
side  costs  such  as  loss  of  capital  stock.
afterwards.  Noting  that  pre-change  costs
We provide examples below.
can  reduce  post-change  costs.  We
currently  have  limited  information  on  the
scale of these costs.
International  costs.  Costs  arising  from
Non-financial channels. Many costs wil  fal
relative  changes  in  New  Zealand
outside  fiscal  and  economic  measures,
competitiveness,
or
from
possible
including aspects of cultural harm, anxiety,
disruption  to  global  patterns  of  trade,
uncertainty,  injury  or  death,  changes  to
migration, or reinsurance. These costs are
social cohesion, or biodiversity change.
highly uncertain.

Table 2: Examples of post-event costs from acute natural hazards
Fiscal
•  Relief and recovery costs. For example, the direct fiscal costs to the Crown such
channels
as  temporary  accommodation,  support  to  firms.  For  example,  NIWE  included

$318m fiscal cost for temporary accommodation.
Economic
•  Output loss refers to the economic cost of lost production or consumption, for
channels
example  from  interruptions  to  the  operation  of  farms.  While  rebuild  activity  will

increase GDP, there is no increase in wellbeing if assets are only returned to their
pre-event state. NIWE output loss was estimated to be $0.4 – $0.6b over the first
half of 2023. (Note: output loss may also indirectly affect Crown revenue).
•  Inflationary  effects.  Rising  prices  are  an  economic  impact  resulting  from
reduced supply of goods and services, for example due to lost crops. These may
be transitory or more long lasting, depending on the event. NIWE’s inflationary
impact was estimated at around a 0.4% price rise over the March and June 2023
quarters.
Combined
•  Capital loss refers to the cost of repairing or replacing damaged physical assets,
fiscal  and
which can be economic (private asset damage) or fiscal (public asset damage).
economic
Capital costs are typical y  moderated by insurance.  Capital  loss from the 2023
channels
North Island Weather Events is estimated at $9 – 14.5b across both public and

private spheres.

17 Based on the framework published by the Treasury in the Climate Economic and Fiscal Update 2023.
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Appendix Three: 2023 North Island Weather Events:  Impact on
OBEGAL and net debt
The NIWE response is expected to add $1.7b to core Crown expenses in 2023/24 out
of total expenses of $140b 18 and $4.7b has been allocated over the forecast period to
date. This is material when considering the forecast OBEGAL deficit of $9.4b in
2023/24, and the target of returning to surplus in 2026/27; a surplus currently forecast
at $0.1b. This implies that were further such events to occur in the forecast period, with
a similar costs, there would be an impact on the OBEGAL surplus date objectives al
else being equal.
We estimate the NIWE response is increased net debt as a proportion of GDP by
approximately 0.4 percentage points. Though less material than the impact on
OBEGAL, it adds to net debt which is yet to peak (at 23.3% of GDP in 2024/25 against
a policy ceiling of 30%.)
The table below breaks down the Crown’s $4.7b of allocated new spending.
Future of severely affected locations (Cost sharing for buyouts,  $1.73 billion
flood resilience and additional transport projects)
Transport (e.g. State Highway, local road, and rail repairs)
$1.68 billion
Temporary accommodation
$318.8 mil ion
Managing silt, sediment and debris
$250.2 mil ion
Business support (excluding loan schemes)
$161.0 mil ion
Social  sector  support  (e.g.  provision  of  basic  needs,  mental  $138.0 mil ion
health and employment services, other community supports)
Education (e.g. school repairs)
$118.2 mil ion
Recovery support structures (e.g. additional funding for NEMA,  $87.9 million
establishing the CRU)
Support for affected Māori
$34 million
Other
$198.2 mil ion
Total operating expenditure
$3.96 billion
Total capital expenditure
$738.2 mil ion
Total
$4.70 billion

In addition to this allocated funding.
•
The Crown reimburses councils for eligible response and recovery costs, based
on standing civil defence commitments. This is funded through a permanent
legislative authority. DPMC estimates costs for 2022/23 will be $17.053 million.
Costs for later years cannot be estimated at this stage.

18 HYEFU 2023 page 33
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•
The Government provided a package of up to $2.24 billion to support businesses
via the North Island Weather Events Loan Guarantee Scheme (supported loans
up to $2b) and Primary Producer Finance Scheme (funded up to $240m).
•
The Earthquake Commission scheme provides cover for residential land (not
buildings) damage, including for climate related risks such as floods and storms.
As of June 30, 2023, the estimated total cost of claims for the NIWE is $486
million, with $8 million already paid. Claims are paid out from the levy-based
Natural Hazard Fund.
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IN-CONFIDENCE
Appendix Four: Likelihood and consequence of selected natural
hazard events in New Zealand
Earthquakes have historically caused far greater fiscal and economic costs than
climate extremes and will continue to present a significant risk. For context, the
National Emergency Management Agency estimates the fol owing likelihood of climate
and seismic disaster events19:
Event
Likelihood over next 50 years
Potential capital damage
Cyclone Gabriel e
80%
$9-14.5b (based on NIWE)
equivalent
Alpine Fault earthquake
75%
$10b
Hikurangi subduction
25%
$10-20b
zone earthquake
Wel ington fault
5%
$16b
earthquake

19 https://www.dpmc.govt.nz/sites/default/files/2024-02/bim-2023-nema.pdf
Treasury:4985691v1
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Page 39 of 39

Excerpt from Cover Briefing to RBNZ Report #6102 Reserve Bank Financial
Stability Report May 2024
Page 2:
Paragraph 6
“Special Topic 2 has an assessment of insurance availability and risk-based pricing.
There is a clear trend of insurers moving towards greater use of risk-based pricing for
residential dwelling insurance. This means insurance premiums are more tailored to the
risks that individual properties face (e.g. seismic or flood risk). Granular risk-based
pricing provides a strong signal for all affected parties to proactively manage these
risks. However, it may result in insurance becoming increasingly unaffordable or
unavailable for high-risk properties. As a result, it is important that impacted
stakeholders improve their understanding of natural hazards.”

1

Document Outline

MOIA Reply (WILLIS 430) (20240446)_ Uninsurability, insurance retreat, and rising insurance costs (Paul Shelton)
20240446 MOIA Binder amended
- Table of Contents