Incentives such as lower premiums are needed to encourage home raising and retrofitting, and buybacks are no silver bullet for resilience, Queensland Reconstruction Authority CEO Jake Ellwood told an event today.

Mr Ellwood said buybacks through a $741 million program started after the 2022 southeast Queensland floods will affect only 0.1% of state homes with a 1% annual exceedance probability flood risk. The measure is commonly known as a one-in-100-year event risk.

“It’s not the silver bullet, it’s an option,” he told a safer homes and affordable insurance panel at the All Actuaries Summit.

Mr Ellwood said buybacks have been important for high-risk properties that flood routinely and where water velocity represents a threat to life.

Elsewhere, raising homes is “tried and tested” and will often have a positive impact on premiums, while retrofitting so a property is more flood resilient and recovery times are faster would benefit from greater insurance recognition, particularly as people face financial constraints, he told the summit.

“You do need to incentivise – there is a cost that comes with building with different materials,” he said. “It’s not easy for insurers because it requires a much more nuanced approach to each house and understanding how it has been built and how it has been amended.”

Planning Institute of Australia CEO Matt Collins said properties are still being developed in risky areas, for reasons including a cost for information and mapping that is often beyond local councils. New information may become available after a subdivision is in the pipeline, flood mapping can be controversial and challenging for elected officials, while sometimes an informed decision can be made to proceed where risks are lower.

Insurance Council of Australia CEO Andrew Hall said the industry body is looking at recent development approvals, and where they’re happening in areas they shouldn’t. The organisation has welcomed a NSW decision against proceeding with a risky development in northwest Sydney.

“We are seeing some examples of this around the country, but we need to move faster,” he told the Gold Coast event.

Rapid population growth and housing demand is pushing people into communities built in the wrong locations, where there is insufficient understanding of the risks and inadequate building standards for climate conditions.

Similar problems have been seen in California, Florida, Canada and other places that have grown in recent times, Mr Hall said.

“We are copying their mistakes and insurance is struggling to keep up. I think we have to narrow down the actual problem we have got, rather than hitting a chestnut with a sledgehammer, and try to focus on where those mistakes were made and prevent them from happening again in the future.”  

Bank Australia Head of Impact Management Jane Kern said banks, insurers, government and customers need “consistent information and ways of sharing it”, including around resilience criteria.

“If you’ve got a customer who wants to make upgrades to their home, they need to know which steps to actually take to help reduce the risk and make the home safer,” she said.

“And if a bank or an insurer wants to reward a customer for reducing their risk and making their home safer, the customer needs a clear way to understand the criteria that have been set.”

From Insurance News magazine: After rolling catastrophes and amid intense scrutiny from authorities, how can insurers get it right next time disaster strikes?