Insurance representative bodies from New Zealand, Australia, Canada, and the UK urge their governments in a joint letter to collaborate with insurers in order to decrease natural hazard risk

The insurance bodies of New Zealand, Australia, Canada and the United Kingdom have told the Prime Ministers of their respective countries in a joint letter that extreme weather events are making insurance unaffordability worse.

The letter, which was published on Monday, was co-written by the Insurance Council of New Zealand (ICNZ), the Insurance Council of Australia (ICA), the Insurance Bureau of Canada (IBC) and the Association of British Insurers (ABI).

The four insurer lobby groups say governments and insurers have a “critical opportunity” to collaborate and build a shared view of current and future hazard risk. 

“Down-scaled data on how flood, fire and cyclones are increasing in frequency and/or intensity as a result of a changing climate is essential to informing how these risks are appropriately priced by industry and managed by policy makers. Greater collaboration between insurers, national science and data agencies will accelerate this work,” the letter says.

“More frequent and intense disasters, coupled with ongoing development of areas at high risk of extreme weather and growing asset values, are widening the gap globally between those who can afford insurance in high-risk areas and those who can’t – often leaving society’s least wealthy unable to rebuild and recover when disaster strikes.”

Collectively, the associations represent approximately US$200 billion (NZ$329.4 billion) in Gross Written Premium (GWP). Gross Written Premium is the total amount of money customers are required to pay for insurance coverage on policies issued by an insurer.

The letter noted that only 38%, or US$108 billion (NZ$177.8 billion), of global economic losses were insured in 2023 which left business and communities “without a safety net”.

It also eroded the ability of economies to recover from fires, floods, earthquakes and cyclones, the letter says.

The four insurance representative bodies held a Global Insurance Protection Gap Forum in Sydney last week ahead of the Commonwealth Heads of Government Meeting (CHOGM) in Samoa which is happening later this week.

The letter says the Global Insurance Protection Gap forum had made a number of things clear, including the insurance “protection gap” widening as extreme weather intensified and concern that flood risk is only going to increase.

“Many Commonwealth insurance markets are seeing significant increases in hazard risk and resulting premiums in regions particularly vulnerable to disasters, and this challenge has compounded over the last decade,” the letter says.

The insurance bodies suggest that applying “excessive taxes and levies” to insurance premiums could directly affect the affordability of insurance coverage. 

“Taxes and charges widen the protection gap and disproportionately impact the most vulnerable in our communities who are often the most impacted by extreme weather risk,” the letter says.

“Additionally, overly burdensome regulation can complicate the insurance process, leading to higher administrative costs. Across our jurisdictions, reviewing these rates is one of the fastest ways to reduce premiums and narrow the protection gap.”

ICNZ Chief Executive Kris Faafoi says New Zealand experienced last year just how devastating severe weather events could be on lives, livelihoods and communities.

“There is much to be gained by working together on these issues across the UK, Australia, Canada and New Zealand through policy work, relationships and our responses to natural disasters,” he says.

“Insurers stand ready to work with their own governments and across jurisdictions to proactively protect the things we hold dear, our communities and our countries now and into the future.”