Modelling economic risk to sea-level rise and storms at the coastal margin

Abstract

We investigate the economic vulnerability of coastal communities to the compounding impacts of sea-level rise (SLR) and storm flooding and inundation associated with climate change. Our integrated assessment quantifies physical drivers alongside socio-economic well-being for coastal communities, to provide a methodology for managing uncertain futures. A New Zealand case study is used to illustrate the long-term economic impacts of inaction under different SLR projections and recognise critical tolerance thresholds to help exposed property owners plan their future.

Two stand-out drivers that influence the behavioural response of communities to coastal inundation were identified:

1. the ongoing likelihood of risk transfer to the insurance industry, and
2. the decisions of households and firms to accept risk for the added value of coastal living.

Model outputs suggest that the threat posed by coastal hazards drives a behavioural, socio-economic response that exceeds the initial economic exposure of capital assets. In the economic short term (1–10 years) and medium term (10–20 years), vulnerable communities accept the risk of capital loss and loss of insurability, favouring the amenity of coastal living. However, in the long term (+20 years), economic losses from repeat flooding increase risk-based insurance premiums, promote insurance withdrawal and drive negative corrections in property valuations.

Unanticipated insights obtained from the modelling include the likely timing of tolerance thresholds, particularly the insurance withdrawal point, which is critical to insurer/consumer decision-making and community planning.