Reducing disaster risk should be part of any climate change adaptation policy, a new report says.

The rising cost of extreme weather is due mainly to the growth of populations and wealth in disaster-prone regions, rather than human-influenced climate change, according to researchers from Risk Frontiers at Macquarie University, Aon Benfield Analytics and the University of Colorado.

They say there is a limited amount insurers can do to price for future risk, given the typical policy lasts only a year and companies are answerable to shareholders and governed by annual reporting periods.

The best insurers can do is price to reflect current threats, according to the report called Market-Based Mechanisms for Climate Change Adaptation.

It says government involvement in insurance can encourage risky behaviour, because homeowners in low-risk areas are forced to subsidise those in high-risk zones.

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