An IAG-backed resilience report has mapped out an 11-point plan over three years to protect Sydney from future flooding and other extreme weather events. 

The report, produced by think tank Committee for Sydney, says a major rethink is needed after last year’s record floods – the country’s costliest insured disaster with losses in excess of $6 billion.

The $6 billion insured loss was dwarfed by the uninsured impacts, estimated at $15 billion, and those numbers will only get bigger with the national cost of natural disasters projected to nearly double to $73 billion by 2060. 

The three-year approach is aimed at integrating land use and hazard risk planning, better alignment of funding and investment, and addressing the residual risk. 

“Sydney is at a crossroads. We’re facing a housing crisis and climate crisis,” the report, Defending Sydney, says.

“Without clear structures to manage this increasingly scary risk cocktail, the result will be more and more development in areas exposed to floods and climate change. This document is about how we manage these two risks together.”

The recommendations include providing support for local governments to assess and communicate risk, setting up regional critical infrastructure groups, engaging the financial services sector in disaster adaptation planning and developing a NSW policy and guideline for planned relocation.

“It’s not just the increasingly destructive force of climate-driven disasters themselves that are currently driving higher losses for insurers globally and putting pressure on the Australian reinsurance market,” IAG CEO Nick Hawkins said in the report.

“It’s growing asset values, urbanisation and rising populations – often in the most high-risk areas… we are witnessing increasingly expensive reinsurance markets for our country because of what we have experienced in recent years and what we can expect in coming years because of climate change.” 

The report says insurance providers and the wider financial services sector have a place in the resilience conversation.

Neither State nor Federal Government owns all the risk from natural disasters and climate change, says the report. In last year’s East Coast floods, insurers only paid for around 30% of the total cost of that disaster.

“In the wake of recent natural disasters, Governments, at State and Federal scales, have also begun signalling that the costs of disasters are unsustainable, meaning that the capacity of government to act as the ‘insurer of last resort’ may be limited in the future.

“This could mean a stricter view on where development is allowed in the future and strategies to reduce legacy risk.

“Acknowledging that these risks are shared, including financial risks, would be a significant step in how we approach planning for natural hazards and climate risk.”

Financial risk relates to the cost of disaster response, recovery and reconstruction that is present in each place – costs that can be amplified by recurrent disasters, says the report.

In the report IAG highlighted an explicit link between residual risk, insurance, and land use planning controls.

“The level of natural hazard risk a community faces is directly impacted by land use planning and development controls,” the report says.

“Generally speaking, the tighter these controls, the less residual risk. If we do not have tight planning controls, insurance becomes less affordable.” 

 Click here for the report.