Australia's Climate Risks Are Making Home Insurance Unaffordable - Yahoo Finance
Australia’s Climate Risks Are Making Home Insurance Unaffordable
(Bloomberg) -- Australian home insurance premiums jumped the most in two decades in the past year, driven by weather catastrophes and higher building costs, new research showed.
Most Read from Bloomberg
America’s Fastest Growing City Is Embracing ‘Yellowstone’ Mania
Outsider Milei Upends Argentina’s Election With Primary Win
Goldman Pencils In First Fed Rate Cut for Second Quarter of 2024
The Fed Is Playing a Waiting Game to Try to Avoid a Recession
US Steel Starts Review as It Spurns $7.25 Billion Cliffs Bid
Median home insurance premiums surged 28% to A$1,894 ($1,240) in the year to March 31, according to a report released Monday by the Actuaries Institute. Premiums in the highest-risk properties — such as those in flood or bushfire-prone areas — shot up 50%, it said.
The number of “affordability stressed” households — those spending more than one month’s worth of their gross annual income on home insurance – climbed to 1.24 million from 1 million households a year ago, with the overall proportion rising to 12% from 10%.
On average, those households spent 8.8 weeks of their income on home insurance. The new data comes as many Australian households are already struggling with elevated inflation, rising borrowing costs or soaring rents.
“Half the increase in home insurance premiums relates to building cost inflation, which has spiked during the past two years due to supply chain shortages,” said Sharanjit Paddam, one of the report’s authors. “There’s also been an increase in natural disasters and higher reinsurance costs, driven by the climate change impacts we’re already seeing.”
The hardest-hit households are in the flood-prone Northern Rivers region of New South Wales, as well as north Queensland and Western Australia, where cyclone risk is high, the research showed.
READ MORE: Wildfire’s Toxic Legacy Has Children Gasping for Air Years Later
Extreme weather catastrophes are becoming more common around the globe with climate scientists warning that one-in-a-100-year disasters will occur more frequently unless carbon emissions are reduced dramatically.
Prime Minister Anthony Albanese announced last month that Australia will join German Chancellor Olaf Scholz’s climate club to help expand international cooperation on tackling global warming amid record temperatures.
“Based on science, we expect these home insurance affordability pressures are likely to continue to worsen due to climate change,” Paddam said.
“Without insurance, households will struggle to recover from disasters and governments, taxpayers, charities and many informal means of support will be left to assist.”
Most Read from Bloomberg Businessweek
Is the Airbnb Dream Dead?
When $1,600 a Night Is a Good Price for a Hotel
When the Whole Town Is Out of Office
From Pepperoni Math to Nepo Babies, Summer Is for Interns
©2023 Bloomberg L.P.
Related Knowledge Center: Climate economics
Climate change is now a driver of the world’s economy. The impact is profound:
- Catastrophic weather events — hurricanes, floods, droughts, high temperatures — are more frequent and more extreme. The cost can be measured in both the initial damage caused and the longer-term impact on the economy.
- Vulnerable communities are increasing climate-related investments, hardening infrastructure and taking other protective measures.
- Investment in carbon capture and storage technologies is increasingly rapidly.
- Governments are making investments and crafting regulations to reduce emissions of carbon dioxide and other greenhouse gases.
On top of all of this is the cost of uncertainty. As the Fourth National Climate Assessment, released in 2018 by the U.S. Global Change Research Program, says, “The assumption that current and future climate conditions will resemble the recent past is no longer valid.”