"Highlighting the inadequacies of the way in which the earthquakes of 2010-2012 were handled by the insurance industry! "

Government Responsibility – Insurance and Climate Change


This Saturday I participated in the climate change protest in Christchurch City. It was great to see the thousands who attended. I was struck by the difference in the crowd between climate change protestors who were out in force and a large group of affected insurance policyholders who seem unable to rally together in the same way. Perhaps policyholders have not made the connection between climate change and insurance yet ….


Climate change does not simply involve changes in temperature, precipitation or wind patterns.

Heat waves, tropical storms, hurricanes, tornadoes, and drought are part of that cycle too. Climate change is referred to by the insurance industry as an ‘emerging risk’ because there is uncertainty in respect of the scientific, political, social and economic parameters. And while there is uncertainty it is clear that over the coming years the insurance market will be affected by climate change in some shape or another – which ultimately means that you and I too are likely to be affected. And while there’s already a plethora of academics and insurance professionals working on how the industry may be least able to be affected by potential litigation – they’re using the asbestos and tobacco giant litigation problems as role models for the emerging tort litigation. Entire text books have been written about how the industry could avoid mega claims. And climate change related litigation has already begun e.g. American Electric Power Co v Connecticut, 131 S.Cr 2527 (2011); Kivalina v ExxonMobil Corp., No. 09-17490 F.3d , 2012 WL 4215921 (9th Cir. Sept. 21, 2012); Comer v Murphy Oil USA, 585 F.3d 855 (5th Cir. 2009).

It is clear to me that the majority of people do fail to see the relevance or the connection between insurance and climate change – it certainly has not passed me by. As I researched my first book The Christchurch Fiasco: the Insurance Aftershock and its Implications for New Zealand and Beyond, I was continually presented with stories and case studies where the insurance industry had simply pulled out of whole areas because their financial business case no longer made sense. Their risk was greater than the possibility of large profit margins – insurability was no longer an attractive prospect or affordability made insurance unviable for residents e.g Florida, recent areas of flooding in the UK, massive increased premiums and excesses in the Flockton basin, parts of hurricane country in the USA and the list goes on …In these situations who picked up the slack? – yes you guessed it, the governments.

There is a critical role for any government in adaptation to climate change and what is so clear to me is that the private insurance model simply will not work in a world with ever increasing natural disasters occurring. Private insurance will not be the risk management tool it claims to be when the proverbial poo hits the fan at an increasing rate. And let’s not forget the potential effects of a global financial crisis coupled with a global environmental crisis. Can you imagine?….

So who will be paying for the fall out of climate change? National resilience to global risk needs to be a priority so that critical systems continue to function despite a major disturbance and this means being financially prepared to pick up the pieces. We do not want a repeat of the Christchurch insurance fiasco on a larger scale.

Spending billions on ill-advised and environmentally damaging beach and coastal rebuilding projects, while ignoring the looming threats of rising seas and intensifying storms is fiscally irresponsible. We need to identify the major risk areas in the nation. We need enlightened approaches to replacing infrastructure and to look for opportunities to change the footprints of communities in an effort to reduce exposure to the next event. If money is going to be spent it should be on long term solutions such as relocating roads and buying out owners on high risk properties. Slowly private insurers will pull back from the coastal zone or raise their premiums to unaffordable levels, which will leave public insurers like EQC having to fill the void. It’s time to beef up EQC (a serious change of responsible management is also required, not the glib shambles we’ve been witnessing these past five years) in preparation, ensuring that vulnerable properties have access to flood insurance that in the future, will not be available in the private markets. See

Increasingly I read articles with titles such as ‘insurers planning for climate change’ – yeah right! They’ll be the first to jump ship and we all know it! There is no doubt that climate change (manmade or otherwise) will have a massive impact on the pricing of long-term flood insurance. Nationally tailored responses to climate change are critical. The New Zealand Government should be sitting around the table now, discussing the best way forward, how to protect citizens and their equity from (un)certain disaster. We cannot rely on private insurance – when you need it most they simply will not be there. Citizens should also heed this warning. Mitigation is the best course of action and adaptation will be essential in response to actual or expected climate change impacts. As far as I am aware the New Zealand Government has not even begun to think about the future in these terms, or at least never published that it is. The private insurance industry on the other hand is well ahead of the game, already contemplating policy language changes, new exclusions, sub-limits, restrictions on underwriting certain industries, changes in risk and risk profiling, strategic changes to the language of existing exclusions, limitations, managing individual policy limits of liability and term lengths, managing overall aggregate liability exposure for a given class or line of business, creating intentional coverage ‘grants’ to serve market needs and participating in public policy debates regarding changes in relevant laws and creating new legal standards in order to secure the ability to continue underwriting with a larger degree of legal predictability. In addition the TPP agreement has the possibility of legal challenge against the NZ government in respect of ‘loss of profits’ in cases that the insurers will be able to concoct.

I’ll say it again as I’ve said it before – policy holder protection and private insurance are ideologically opposed – other solutions for citizen protection must be found.

Citizens of New Zealand, now is the time to be putting pressure on your Government to ensure that the EQC funds are not again pillaged by present and forth coming Governments for various causes other than those that they were meant to serve. Now is the time to be saying to the Government – it’s time to think and do something serious about growing some very large EQC reserves. Now is not the time to be blindingly assuming private insurance will protect us. We know it won’t.

As yet insureds have not focused much attention on the impacts of ‘climate change’ but the reality is that there is a huge potential exposure associated with climate change and that exposure is beginning to emerge. The time is right for policyholders to begin to put pressure on councils and government to answer adequately and implement realistic strategies for a myriad of expected climate change related issues, issues that policyholders will surely look to insurers to clearly indemnify.

In my opinion, given the urgency of the matter there is no time to waste – New Zealand. In fact this issue should be a major point in the upcoming general elections. Maybe Labour needs to take a second look at KiwiSure.

Author: Sarah-Alice Miles

Love to write, create and watch the clouds move across the sky - these days in the Netherlands. 'Art allows us to find ourselves and lose ourselves at the same time'.

10 thoughts on “Government Responsibility – Insurance and Climate Change

  1. I did not even know the march was on and just thought from the photos it was a bunch of greenies. Where was it adevertised? You did not answer my question in that do you want emissions reduced in the hope flooding of low lying land will stop or do you want dykes, sea walls built to prevent flooding so that insurance will still be available? Its more likely to be of concern only to those who live by the sea for most insurance holders to not be concerned. I think you will have a problem getting even coastal resid
    ents believing in a conection with climate change if you think it can only be stopped by leaving all oil and coal in the ground as the greenies want. Like i said if its to get dykes etc built there would be interest in the cause although the council has already ruled out a estuary flood wall due to cost. It could be best to maybe sell up now for worried coastal residents as there will always be people with a She’ll Be Right Attitude who will by off you in the same way the earthquakes have not put poeple off buying on the hills.


    • Protest was advertised on – what I would like to see is debate- public discussion – participation and democracy – everyone thinking about these profound issues and coming to sensible decisions about these major issues.


      • Sarah I have never heard of that website but looking at the coments in response to media photos on FB most have said they are all hypocrites as they would have driven to the start of the March in their cars. Nothing has been commented on about any conection between climate change and insurance in the media so your message has possibly not got through in the same way the greenies message has of wanting to leave coal and oil in the ground and close down the dairy industry. The unusal thing about the ETS is that I think Natioanal has pulled out of Kytoto but has not dropped the the Emissions Trading Tax on power and petrol/diesel which makes you wonder where the money is going. The whole thing is a con in my opinion.


      • BY ‘the whole thing’ are you referring to climate change generally – certainly you would not be alone in this view. On the other hand there is no denying that we have done a profound amount of damage to our planet and its well past time we did something to stop what has already taken place….


  2. Hi Sara, I’m sorry you found what I wrote so offensive – after a five year battle with State Insurance myself ao I fully understand your frustrations. However sitting back and waiting for a solution is not the answer. The way I see it – when you give up you give it away. Now more than ever people should be working and banding together.


  3. The govt belief is that Climate Change can be reduced or stopped by putting money into carbon credits or increasing the cost of the emissions trading scheme expected to be 30B dollars by 2030. If I read your story correctly that money would be better spent on building dykes/flood walls etc? Either way it will end up being paid for by us the tax payers. My impression from the news of the marches yesterday was that all those marching wanted all oil and coal left in the ground as that is what the Greens think will stop Climate Change and some wanted the Dairy industry closed down which of course is a recipe for financial doom. You may have been in the wrong Climate Change march with the agenda you have which does make more sense than the destrucive ideals of the greenies.


    • Peter, yes there were Greenies there- but there were also people from all the major parties, it would be a mistake to politicize this issue. This issue is far bigger than any one political party.


  4. ” I was struck by the difference in the crowd between climate change protestors who were out in force and a large group of affected insurance policyholders who seem unable to rally together in the same way. Perhaps policyholders have not made the connection between climate change and insurance yet”…REALLY?!! Perhaps so called affected policy holders
    are actually more aware of the protesting and endless battles they have with Insurance Companies, EQC etc that have mostly been a waste of breath and time. Perhaps they understand more so than people who have not been affected…may be they very much understand the battles ahead…maybe they are just bloody tired… So yes we care big time about climate change and the insurance dilemma. maybe you should think about “a large group of affected insurance policyholders who seem unable to rally together in the same way” as perhaps a very odd thing to say?


  5. Hello Sarah,An excellent article which I have sent on to all of my family in the Nth Island who have no worries at the moment but possibly coming their way soon.As far as why claimants are unable to band together, maybe many are like me.I’m beaten.The entire carry on since the quakes and the behaviour of Insurers generally and EQC and SR in particular has beaten me or rather they’ve beaten my organism.My system no longer behaves itself and I’ve gone from being a relaxed, fit, sporting, happy individual to three times in the cardio ward with all the signs of heart attacks.I’ve had multiple tests, ECG, MRI’s and all show no signs of disease and after the last cardio trip (Sept this year) with the Docs and Cardio Specialists still scratching their heads, I’ve realised it’s largely stress related and the only cure in my opinion is to ignore the problems and just work on staying alive.So the idea of attending protests etc is just not a possibility for me any more.I’ve always been aware that this “beat them into submission” is a part of IC strategy generally, in all fields of insurance.However, even with this knowledge, it is dismaying to realise that the strategy has still worked on me or at least my organism which seems to be out of my control now to a certain extent.Pretty scary stuff and my solution has to be to cash up, get out of Christchurch and see if it’s possible to recover a life style somewhere else.Possibly I’ve been unrealistic with my expectations but now I am very disillusioned with our systems and our leadership and never would have believed this could happen in NZ.All the best to you and the good work you are doing, keep it up but don’t let it grind you down.Regards,             Mike Sinclair


    • Hi Mike, I am sorry to read your email and I do understand your sentiments. I had hoped that Christchurch people would battle these issues together as some are doing in the form of group action – I am hoping that for those still waiting for solutions that they will slowly get together. I think its a much easier way to go – yes it takes time but the personal toll is lesser – you can sit back and wait for those running the show to do their thing. I too have become very disillusioned with our supposed democracy and also would not have expected this to happen in New Zealand – but clearly we live in a changed world. Take care of yourself and don’t let the buggers get you down – easier said than done I know!!


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