New Zealanders must accept managed retreat from some parts of the country to keep residents safe - and insured - as climate change increases the severity and frequency of natural catastrophes, Tower Chairman Michael Stiassny says.

Policymakers face “huge questions that require urgent consideration and a comprehensive plan to resolve,” Mr Stiassny says, after record floods in the North Island in January, followed by devastation from deadly Cyclone Gabrielle last month.

“The unfortunate truth is that there are some areas in New Zealand that should not be rebuilt in the event of a disaster or that will become–literally –uninsurable,” Mr Stiassny said.

"Cyclone Gabrielle sheeted it home in the most tragic way. Developers have been allowed to build in risky areas and as we are seeing, building on flood plains and at the edge of or below cliffs is not smart.”

Policymakers and the communities affected need to identify and agree on innovative funding solutions, he said, adding there was "no question” the insurance industry has a major role to play.

Tower had been "engaging around climate change,” developing sophisticated data sets to underpin risk-based pricing on an individual property basis and gaining a granular understanding of inland flood-risk profiles.

"We need to have this debate now,” he said. “We need to identify and accept that in some parts of New Zealand managed retreat will be the safest and most pragmatic way to address the risks associated with climate change in order to protect lives and property.”

Issues to address include where to build, and what and how to rebuild or build anew, he said.

“When it gets to the gnarly decisions around potential longer-term solutions to address the most severe impacts of climate change – especially the vexed and complex question of managed retreat – the rubber is going to hit the road,” he said.

"Once you know it’s a risk, it is morally indefensible to wait until after an event to instigate some version of managed retreat.”

About 45% of the average Auckland house insurance premium is EQC and fire levies and tax, and Tower would be “deeply concerned” to see additional levies or increases that result in even further cross-subsidisation of risks “as has occurred with the most recent EQC levy hike”.

“We don’t believe that customers in low-risk areas should pay a disproportionate share of levies,” he said. “We’ve committed to matching premiums to individual risk, rather than averaging total risks.

"There is no room for complacency. Tower remains tightly focused on managing climate change risks.”