Wellington Scoop

A recipe for insurance disaster?

by Jenny Condie
The Wellington City Council is planning how to accommodate 80,000 new residents in Wellington over the next 30 years. Meanwhile, home owners in Wellington are facing insurance premiums up to three times higher this year. Justin Lester’s response was to summon insurance companies to a mayoral forum, presumably for a stern talking to. It’s an understandable response, but is the problem simply a case of corporate greed?

Where do you think we should house up to 80,000 new residents in Wellington?

At the moment, the WCC has their “Planning for Growth” report out for consultation. It showcases four options for how the city could grow over the next thirty years. All four options presented by the Council include increasing the resident population of the central city by at least 18,000 people by 2030, an 84% increase. (The highest density option would increase the resident population of the central city by 130%.)

From the standpoint of lowering emissions and improving inner city living, increasing urban density is a great idea.

However this year alone, some Wellington home owners have seen their house insurance premium more than triple. Body corporates who insure apartment buildings have seen similar rises since the Christchurch and Kaikoura earthquakes. There are reports that some buildings in Wellington’s city centre no longer have insurance for natural disasters. One academic has warned of the “possibility of a collapse of the disaster insurance market in Wellington. It has happened in overseas markets.”

In response, Justin Lester has called for a forum with insurance companies. As politically appealing as it may be to cast the insurance corporations in the role of villains screwing over hard working home owners, I hope that he resists any impulse to slap companies over the wrist with a wet bus ticket. The reality is that the risk profile of Wellington is changing, and Wellington needs to change too.

Insurance companies are switching to a risk based pricing model. This means instead of sharing the risk of damage from a Wellington earthquake or other natural disaster across the whole country, Wellington will have to pay higher premiums to cover a larger share of that risk.

We’ve always known Wellington is at high risk of an earthquake, but the Christchurch and Kaikoura earthquakes have taught us a lot about related hazards like liquefaction. We now know that reclaimed land, such as that along the city’s waterfront, is at high risk of liquefaction, which threatens the stability of every building from Lambton Quay and Wakefield Street to the waterfront.

The risk of an earthquake is the same as it has always been, what’s changed is our understanding of the risk of damage. An area where our risk is actually increasing is extreme weather events and sea level rise driven by climate change.

Even if the global community is able to keep warming under 1.5 degrees, which is less and less likely without major change from large polluters like USA and China, UN estimates the likely range for global mean sea level rise is 30cm – 60cm. NIWA estimates that it’s likely to be up to 10% higher in New Zealand, so our high end becomes closer to 70cm. At 70cm of sea level rise, parts of the waterfront from Queen’s Wharf to Civic Square would be under the high tide mark.

Warmer air temperatures can hold more water, which leads to more rain. This probably increases the frequency and severity of storms. (This is hard to prove and some reputable scientists remain unconvinced.) Combine sea level rise with more rain and bigger storms, and the risk facing insurance companies for storm damage is growing and will continue to grow over the rest of this century and beyond.

Bryce Davies of IAG acknowledges that it’s complicated. “Through the price we charge, through the decisions we make about [who has cover], we are telling people about the risks they are facing and whether they should be there or [not]. In a way, the insurance industry holds a starting gun.” Insurance companies are not the bad guys here, they are changing their premiums to reflect changes in risk.

They could continue to cross-subsidise those risks, but that has only encouraged us to keep building in high risk areas. The Insurance Council of New Zealand have been warning about the need for us to begin adapting our infrastructure for climate change as far back as 2014. Now, insurers have decided they will no longer enable our addiction to waterfront property and thus greater risk.

If Wellington continues to ignore these changes in risk then a collapse of the disaster insurance market seems more a question of when rather than if. And it won’t be the fault of the insurance companies.

How can we respond as a city? I believe we should begin planning a managed withdrawal from the highest risk areas in our city and by increasing density and growth in areas with lower hazards. The highest risk area in Wellington is the reclaimed land along the city’s waterfront, which is at high risk from earthquake shaking, liquefaction, and sea level rise. If there was just one high risk in this area it might make sense to simply engineer our way to lowering risks. With several overlapping risks, all needing different engineering solutions, the costs are unlikely to be justified.

In 2014 the Insurance Council called for local authorities to “deny consent applications where taking the long view shows risks from natural hazards will increase.” Wellington needs to weigh the future risk of damage from natural hazards and make sure the residents of Wellington, present and future, are as safe as possible from natural hazards.

Increasing density in the highest risk parts of Wellington is a recipe for disaster. And we won’t be insured.

Submissions on Planning for Growth close 5pm on Friday.

Jenny Condie is a candidate for the Northern Ward in October’s Wellington City Council elections.


  1. Nora, 17. May 2019, 14:36

    Well said Jennie. Re liquefaction, sea level rising etc…buildings across from the waterfront have had water in their basements for years, the old Union Steam Ship office and BNZ two good examples and understand Meridian decided to only go one floor under! and understand the monstrosity planned for Kumutoto Site 9 is not providing a car park.
    And as for 80,000 more residents what a laugh, riding through the city today by bus lost count of the number of shops etc and offices for “Lease”…they are moving out not in!

  2. Rachel, 18. May 2019, 9:10

    Great article, thank you.
    We have been hit by massive increases to our house insurance over the past few years for our house in Johnsonville, I believe this is because we have a broker so the prices are reassessed each year.
    Two things have annoyed me about this – firstly, our house in Johnsonville is a single story wood house, foundations on rock and up on a hill away from the sea. We have none of the sea rise and liquefaction risks you mention, yet we’re paying crazy prices, no doubt subsidising the higher risk areas of Wellington. We couldn’t shift to a standard policy initially due to the embargo and now due to this pricing structure also being applied across the board for new policies. Which brings me to my second concern… for new home owners, the cost of a new policy is massive. If you’ve managed to save a deposit in this high rent market, starting a huge mortgage, paying higher rates level and massive insurance, it’s another thing making entering the housing market difficult.
    You say we need to stop building and living in high-risk areas, yet it seems the insurance market is saying that all of Wellington is a high-risk area. Do we leave our beloved city behind?!