Devastating Auckland floods should focus government attention on urgent resilience improvements, the Insurance Council of New Zealand (ICNZ) says.

The flooding looks set to be the country’s most expensive extreme weather event on record, not including earthquakes. In the whole of last year insured losses from weather events totalled a record $NZ350 million ($319 million), but this one event is expected to exceed that figure by some distance.

Last year the New Zealand Government floated the possibility of a Flood Re-style pool as it looked for ways to ensure flood risks did not render insurance unaffordable for those in high risk areas.

But ICNZ CEO Tim Grafton says such a scheme would be “a sledgehammer to crack a nut”, and he says New Zealand differs from the UK, where Flood Re operates, and Australia, where flood pools have been widely discussed.

Private insurer policies in New Zealand cover all hazards, including flood, and there is no option for insureds to opt out of flood.

Mr Grafton says New Zealand has not yet encountered the same level of affordability problems that Australia has in places like Lismore, and where flood risk is very high insurers have looked to retain cover but introduce higher excesses.

The Earthquake Commission Toka Tū Ake EQC also covers some land damage caused by flood, within eight metres of a home and within the limits of the EQC Act.

“It’s quite different here. If you buy your standard house insurance then that will cover you for pretty much all hazards,” Mr Grafton told insuranceNEWS.com.au, speaking before renewed wild weather from Cyclone Gabrielle hit the region.

He says insurer members are currently focused on helping clients recover, but that there will be “huge issues” to consider once the clean-up is complete.

“Pretty much at the top of the list is how to make Auckland, and other areas of the country, more resilient,” he said.

“Clearly storm water drains were just totally inadequate to respond to the volume of water that was coming through.

“We had four people killed in this event, so there is a whole bunch of life safety issues. There’s the health risks that emerge when you have sewerage and other contaminants through your house, there’s the trauma of the clean-up, and the economic loss that’s not covered by insurance.

“Quite apart from insurance, we need to be looking at resilience in that context.”

Mr Grafton says 97% of homeowners in New Zealand have home cover, which is a “stellar performance” compared with other nations.

He accepts that insurance affordability could become a greater issue if nothing is done to improve resilience, but argues that a flood pool would likely might the situation worse.

“Is there a big enough problem that warrants intervention? That’s debatable. But even if you do think that, then what level of intervention would be proportionate and appropriate, and avoid creating costly diversions or other unintended problems?

“If we sit on our hands and do nothing about the risk of more frequent and impactful events occurring, then clearly insurance will respond in the way of increasing excesses, increasing premiums, and ultimately some may take the decision not to provide that cover.

“But we don’t want to get into that situation – and we don’t want to get into it not just because of insurance but because people die from floods, people get sick from floods.

“Focus on what is important, the people and their property, rather than trying to think of fancy ways of keeping insurance affordable and hiding the real underlying risks. That just cannot be acceptable.”

New Zealand will be heading to the polls this year, and more than a third of the nation’s voters live in Auckland. Mr Grafton hopes that the timing and location of the flood event will help ICNZ’s messages cut through.

“It’s a very big wake-up call. This will be a be a key issue for an election year – how do we build resilience?

“If every cloud has a silver lining, then the silver lining is forcing the debate on what we do to make the city, and the country, more resilient in future.”