New Zealand insurers are “right on the edge” over providing flood insurance as a standard feature of policies, according to IAG NZ CEO Ian Foy. But he believes more sophisticated risk modelling will enable the industry to continue offering cover to most NZ households and businesses.

He says the NZ industry’s “faith has been shaken a little bit” in the past few years after repairing flood damage several times in the same places.

“There’s already a few commercial risks in New Zealand that now don’t have flood cover because it’s become highly predictable that they’re in a flood plain,” he told insuranceNEWS.com.au.

Mr Foy says that as NZ’s largest insurer, his company sees itself as having a social responsibility in the issue, so a blanket rejection of flood insurance for entire towns isn’t a consideration.

“But based on our experience and our risk modelling, we may be in a position to say we don’t like a certain street that has an extreme flood problem,” he said.

“I don’t think you’ll ever see flood cover taken out of the NZ market, and the underwriters are getting smarter because there’s so many relatively cheap geographic modelling systems available that we can overlay with our claims data.”

Future policies for properties carrying high flood risks will probably have large deductibles imposed or be required to undertake risk management measures. “Otherwise every time there’s a flood we’ll continue to have highly predictable claims outcomes.”