As the floodwaters recede in Auckland, modelling commissioned by the Treasury shows the risks of inundation fall unequally across New Zealand, Marc Daalder reports

Residents of areas exposed to one-in-100-year floods of the kind Auckland saw in recent days are more socioeconomically deprived than the average New Zealander.

Research commissioned by the Treasury, amidst policy work on a potential national flood insurance scheme modelled on EQC, shows flood risk falls unequally on Māori, low-income households and deprived areas. Newsroom obtained the modelling through an Official Information Act request.

Exposure to surface water or pluvial flooding, like the inundation which devastated Auckland on January 27, is more evenly distributed than vulnerability to river or coastal flooding.

* Auckland’s historic flooding explained in five charts
* Minister’s plans to expedite flood reinsurance cover reined in

Still, the average deprivation decile of those living in one-in-100-year pluvial floodplains was 5.87, compared to a national average of 5.4. A higher decile number corresponds with greater deprivation.

Māori and Asian New Zealanders were also slightly more likely to live in these areas than their share of the general population would suggest, while European and Pacific New Zealanders were less likely to. Almost 52 percent of those living in pluvial floodplains were renters, compared to a population share of 47 percent.

Other types of flood risk are even more unevenly distributed.

People exposed to one-in-100-year river flood risk earn 15 percent less than the median wage and have an average deprivation score of 6.67. Over 21 percent of them are Māori, while Māori make up just 13.4 percent of the general population.

European New Zealanders, meanwhile, were overrepresented in exposure to coastal flood risk.

The modelling was performed by Aon and commissioned by the Treasury and EQC as part of the development of a national flood insurance programme. A Cabinet paper from March 2022 warned insurers may begin to pull out of some communities as climate change exacerbates risks and more granular data about hazards becomes available.

“The effects of these two issues are distinct but overlapping and, when combined, mean that households may begin to face rising premiums or struggle to access insurance, though timing of any large-scale impacts is uncertain,” Finance Minister Grant Robertson and then-EQC Minister David Clark wrote to Cabinet colleagues.

“Loss of access to insurance means communities are less resilient and able to recover from flooding events. This has negative wellbeing implications across key wellbeing domains including: housing; income, consumption and wealth; and health and subjective wellbeing. Further, the effects of risk-based pricing and increased flood risk will not be distributed evenly.

“Some (but not all) flood-prone properties are cheaper, and therefore home to those in lower-socioeconomic situations. Those on low incomes are most likely to be impacted by affordability issues caused by an increase in insurance prices. However, all homeowners of high-risk properties (i.e. across all incomes) would be affected by changes to insurance availability.”

Auckland’s recent pluvial flooding is expected to result in a total insurance bill as high as $1 billion. 

Australian-owned IAG, which owns State Insurance, AMI and NZI here in New Zealand, told the ASX it may have to increase its “natural perils” budget which had been set at $909 million for both sides of the Tasman in August. In the wake of the floods, the company’s share price fell slightly from a 15-month high.

Insurers are likely to raise premiums in Auckland and may pull cover entirely from hardest-hit homes.

A national insurance scheme would aim to plug these gaps, but it would come at a cost to all taxpayers. In effect, those with houses less exposed to floods would be subsidising the owners of the riskiest properties.

Marc Daalder is a senior political reporter based in Wellington who covers climate change, health, energy and violent extremism. Twitter/Bluesky: @marcdaalder

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