A recently-published study by The Climate Institute showed that an estimated $90 billion worth of housing in Australia could be exposed to extreme events like storms, and this could have a significant impact on the insurance and banking sectors.
Just this year, insurance companies have received more than 11,000 claims with estimated insured losses of $38 million. Most of them are storm-related claims, linked to damaged roofs and gutters, as well as flooding. Severe damages are found on Sydney’s northern beaches, where the most expensive real estate in Australia is located.
According to The Climate Institute’s research paper titled, “There goes the neighbourhood: Climate change, Australian housing and the financial sector,” the risks on homes built in locations where there is increased exposure to weather changes will definitely be exacerbated now that climate changes are happening due to human activity.
“Some housing will become so risky as to be ‘uninsurable,’ with premiums reaching an extremely high level or simply not being offered at all, as insurers deem the risk is unacceptably high. Even a house that is never actually damaged can be subject to very high premiums if the risk of costly damage is high,” the paper noted.
Examples of such properties are those found in the suburbs of Collaroy and Narrabeen, which are deemed to be notoriously difficult to sell and insure because of storm risk.
“Banks and other lenders will insist that mortgages have home insurance when the loan is issued, but that only covers the first year of their mortgage; generally, it is not checked in subsequent years. Under-insurance is known to be widespread,” said Kate MacKenzie, investment and governance manager at The Climate Institute. “Homeowners will often turn to their insurance, but some hazards are generally not covered by home insurance.”
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