Impacts: What will it cost us?
Graphic created by Mark Garrison with data from Storey et al….(yes, we know Auckland is misspelled)
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Summary
The cost of damages from climate change will cost the global economy US$38 trillion per year by 2049 — six times the cost of limiting warming to 2°C. – Forbes 2024
‘Storms a near-weekly occurrence… Over a 15-year timeline, a storm typically affected parts of the country once every 19 days. In the last 12 months, that frequency has more than doubled to once every eight days, making storms a near weekly occurrence,’ IAG NZ CEO Phil Gibson says in the insurer’s Wild Weather Tracker report for natural hazard-related claims received between March 1, 2025 and February 28, 2026 – Interest.co.nz
We generally think of ‘cost’ in monetary terms, so we take out insurance based on the cost of items that could be lost. But insurance can’t replace the things we value most: places we love, access to safe and affordable food and water, the freedoms we enjoy, our whānau and loved ones. Nor can insurance replace an entire species or a community whose land has been eaten by the sea or swallowed by a river that’s demanding to be set free.
The standout message in the second National Climate Change Risk Assessment (2026) is that of the 37 domains assessed, all but 5 have ‘major’ to ‘extreme’ shortfalls in policy readiness. Of those 5, only 1 is a ‘minor’ shortfall, and that’s the stability of the finance sector (Fig 1.) This may seem counter-intuitive given the other risks but policy-readiness refers to the current, not mid-century risk severity. The risk severity in the finance sector (not policy readiness) increases until it becomes ‘major’ by 2090.
Overall, this is an indictment of how abysmally unfit New Zealand’s policies are. Taking time to learn more will help prepare for unavoidable changes. The sooner we do so, the less it will cost, and not just in economic terms. The interactive tools for flood risk and sea level rise on this website are a start.
Insurance retreat
Maybe you’re insured, but if you’re one of the 66% of Kiwis that live on a flood plain or low-lying coastal area, soon you will become uninsurable. In 2026, AA Insurance began declining new policies to part of Westport, Blenheim, and Christchurch.
As sea level rise changes the frequency of inundation events, 99% of properties currently within 1% AEP coastal inundation zones can expect at least partial insurance retreat within a decade (with less than 10cm of sea level rise). Our modelling predicts that full insurance retreat is likely within 20–25 years.
Since mortgages are typically conditional on insurance (especially at the time of issuance), the withdrawal of residential insurance (i.e., insurance retreat) results in an immediate drop in property values as this retreat decreases the pool of potential buyers. – Story et al 2024
My fear is that this will turn into an insurance crisis, then a banking crisis into a government debt crisis. – Massey University banking and insurance expert Dr Micheal Naylor, 2024
Loss of public assets & critical infrastructure
Our 2026 Climate and Catastrophe Insight report — now in its 21st year — indicates that extreme weather events are becoming more frequent and unpredictable, affecting new geographies and sectors, and challenging long-held assumptions about resilience. – AON 2026 Climate and Catastrophe
Personal property is not the only asset that’s becoming uninsurable. Perhaps your home is outside areas deemed at risk, but what about the roads and bridges you need to get to work, school, or go shopping? What about power and water? Councils are increasingly facing huge increases in insurance premiums. For example in the 2021/2022 financial year Christchurch City Council’s insurance premiums were $22.2 million.
In 2020 the Resource Management Review panel found that councils and laws were not equipped to deal with the complexities of climate change adaptation and managed retreat. The report recommended mandatory environment limits or ‘bottom lines’ for biophysical aspects of the environment including freshwater, coastal water, air, soil and habitats for indigenous species. It also called for a ‘managed retreat’ law.
In 2026 the National-led Government put a cap on rates, but insurance companies have not put a cap on premiums.
No more Government bailouts
If you’re uninsured or live in an area that will become at risk in the next few years, don’t expect a bailout from EQC or any other government body.
With private insurers already retreating from areas with high risk and climate-related disasters predicted to become more frequent and severe, the ability of governments to pay for damages is uncertain. All of this leaves a question mark over the government’s role in providing compensation for economic losses from climate disasters.
A billion-dollar flood and cyclone recovery package was announced through Budget23, targeting child mental health services, rebuilding and repairing infrastructure, training and employment, and future flood protection (New Zealand Government 2023). However, this funding is equivalent to 13% to 20% of the estimated damage to just publicly-owned infrastructure, let alone the wider impacts currently not included in the cost. – New Zealand Institute of Economic Research, 2024 (Fig. 2)
Individuals should be responsible for managing their own natural hazard risk. – NZ Government MP 2024
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One third of the assets were uninsured, however this doesn’t take into account other losses including agricultural losses and lost productivity.
In 2021 the Labour-led Government legislated to make climate-related disclosures mandatory for some organisations. The requirement applies to publicly listed companies and large insurers, banks, non-bank deposit takers and investment managers. This forces large financial organisations in New Zealand to disclose how exposed their business and investments are to climate change-related risk. This was a world-first financial strategy to force companies to protect themselves and their investors from stranded assets and the physical risks posed by climate change. It was also designed to force them to divest investments in fossil-fuel related industries.
In 2020 the Resource Management Review panel found that councils and laws were not equipped to deal with the complexities of climate change adaptation and managed retreat. The report recommended mandatory environment limits or ‘bottom lines’ for biophysical aspects of the environment including freshwater, coastal water, air, soil and habitats for indigenous species. It also called for a ‘managed retreat’ law.
However, in 2026, the National-led Government insured it was not responsible for any climate-related damages by passing the Climate Change Response (Tort Liability) Amendment Bill. At first glance the law looks to protect only fossil fuel emitters such as Fonterra and oil and gas companies. But in legal terms, it bars any court from finding any person, including the Crown, liable in tort (such as public nuisance or negligence) for climate-change effects or greenhouse gas emissions in current and future proceedings.
Risks to international trade
The list of ‘unprecedented’ and ‘faster than expected’ events continues to grow. Aotearoa’s promises under the 2015 Paris Agreement were already regarded as inadequate. Dangerous climate tipping points not factored into that Agreement are now being breached as the list of ‘unprecedented’ and ‘faster than expected’ climate-related disasters continues to grow in number and scale.
As time it goes on, meeting our NDCs (Nationally Determined Contributions) is getting increasingly more difficult and expensive because of delay. Not meeting the NDCs: we would certainly expect to see greater scrutiny of our actions from our trading partners particularly where we have free trade agreements (FTAs) and particularly with those strong climate elements within them like the EU FTA.
Global consumers and customers are increasingly scrutinising their supply chains and looking for products that are reducing emissions, and so we do increase risks around loss of the global markets. – Jo Hendy CE; Climate Change Commission 2024 emissions reduction monitoring report
Overshooting 1.5°C doesn’t mean it’s time to throw out the Paris Agreement. It’s not working fast enough, but it is working. The International Court of Justice ruled that 1.5°C is the primary temperature limit nations have committed to work towards. This ruling means that if governments fail to act as ambitiously as they can, they could be sued in international courts. – Peel & Morgan The Conversation 2026
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