Projecting the effect of climate change on residential property damages caused by extreme weather events.

Abstract

Aotearoa New Zealand's public insurer for natural hazards, the Earthquake Commission (EQC), provides residential insurance for some weather-related damage. Climate change and the expected increase in intensity and frequency of extreme weather-related events are likely to translate into higher damages. This would lead to an additional financial liability for the EQC. This paper projects future insured damages from extreme rainfall events associated with what we know of future climatic change. First, we look at the relationship between extreme precipitation events and the EQC's weather-related insurance claims based on a complete dataset of all claims from 2000 to 2017. We then put this together with climate projections from six different regional climate models to predict the impact of future extreme precipitation events on EQC liabilities up to the year 2100. Our results show adverse impacts that vary over time and space. The percent change between projected and past damages ranges between an increase of 7%–8% in liabilities for the period 2020 to 2040, and an increase of between 9%–25% for the period 2080 to 2100. We also provide detailed caveats as to why these quantities might be mis-estimated. The projected increase in the public insurer's liabilities could be used to inform private insurers, regulators, and policymakers assessing the future performance of both public and private insurers.