The worsening impacts of climate change will force home insurers to stop covering thousands of risky coastal and flood-prone properties in New Zealand, a new report warns.

The paper from the Helen Clark Foundation and engineering consultant WSP estimates about 10,000 coastal properties across Auckland, Wellington, Christchurch and Dunedin may be considered uninsurable in the next 25 years due to erosion and inundation risks.

And in flood-prone areas, premiums are expected to rise until they become unaffordable.

The authors warn low- to medium-income households will be worst-affected, creating a “serious social equity issue for the nation”.

“Maintaining high residential insurance coverage, especially for floods, is critical to safeguard the country’s economic and social resilience in the face of climate change, and to keep people in vulnerable locations from falling into poverty when weather-related disasters strike,” WSP report author Kali Mercier said.

She says there are “several potential options to keep insurance accessible and affordable, and as a country we need to urgently decide which we are going to adopt. Some of the more promising include subsidies for those who can’t afford insurance, standardisation of insurance policies (so people know what they are covered for) and making pricing criteria more transparent.”

WSP service line leader for risk and resilience Richard Woods says it is unclear when the insurer retreat will happen, but it is “inevitable” following last year’s disasters.

“The country is just one major disaster away from insurance retreat becoming a much more complex problem than it already is,” he said. “We need a collaborative approach to adaptation and retreat, where decisions by insurance companies complement democratic decision-making about how we adapt to climate change, rather than leading it.”  

Mr Woods wants to see an evolution in the approach to insurance, which “should support community resilience, not leave people behind”.

The report calls for an end to the development of properties in flood-risk or coastal areas that will become uninsurable within the decade.  

It urges investment in climate mitigation and adaptation programs – including relocation for at-risk homeowners – and support for a government flood insurance scheme. 

“The future of residential insurance depends on our willingness to act now, or we face a crisis that could engulf our most vulnerable communities,” Mr Woods said. “With a government work program on climate adaptation and risk assessment well under way, now is the time to be having that discussion.”