The nation’s biggest insurers are modelling premium affordability under different climate scenarios for the prudential regulator.

IAG, Suncorp, Allianz, QBE and Hollard are expected to deliver projections to the Australian Prudential Regulation Authority in the first half of next year, and APRA will then publish a report based on the submissions.  

The regulator says the Climate Vulnerability Assessment, which began in July last year, will help improve understanding of how affordability may evolve between now and 2050 amid changing natural disaster threats and energy transition risks such as changes to climate and energy policies, technological innovation, social adaptation and market shifts.

“Climate change could alter both the cost and the income aspects of affordability,” APRA says.

General insurance premiums may be affected by climate risks increasing repair and construction costs, adding to inflationary pressures and driving up reinsurance costs, it says. Household income may be influenced by transition risks affecting the Australian economy.  

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