From record heat to vicious storms and flooding. It’s not a hoax, the climate’s changing and insurers are urging businesses to future proof their companies, and quick.
According to Niwa’s chief climate scientist Sam Dean, climate change will see the intensity of major weather events increase significantly.
“All storms are happening in a warmer, more energetic environment and as a result will be carrying lots of moisture. This means they drop more rain, cause more flooding and have stronger, more damaging winds. This certainly leads to larger impacts on people and their assets.”
NZI’s national business continuity and asset protection (BCAP) portfolio manager Bryan Tedford says they’re already seeing the evidence.
“Last year insurers settled or partially settled 25,500 claims from extreme weather events around the country and 2018’s looking to be heading down the same path as well.
“This year alone, we’ve seen significant damage from January’s vicious storm in Hauraki and the Coromandel and again in February when parts of the country were hit by ex-tropical cyclone Fehi.”
While the costs of both weather events haven’t been finalised, in early February almost 2000 claims worth $12 million were lodged with NZI’s parent company, IAG as a result of January’s storm, and more than 800 claims were lodged with IAG of a value of $6.7m following Cyclone Fehi.
When Fehi took hold, parts of West Auckland experienced flash flooding.
Hundreds of people were evacuated from their homes, cars were underwater and mud and debris coated the walls of properties up to waist height.
Dean says flash flooding like this will continue to be a particular problem for businesses now and into the future.
“Scientists around the world believe that the most significant increase in extremes will happen in convective downpour.
“During these heavy downpours both natural and man-made drainage systems cannot process the water volume and flooding quickly occurs. Such flooding will be a particular challenge for urban areas.”
Bryan Tedford, national property manager at IAG, believes long-term success is reliant on what companies do now to prepare for the future. He says a solid contingency plan is key.
“Business owners need to protect their properties and other assets but also have back-up plans for computer systems and other necessary equipment and ensure they have good communication systems in place so they can get in touch with employees should they be restricted from coming into work.”
He says different businesses will have to prepare for such events in different ways – but everyone should have some sort of plan in place.
Despite these risks, underinsurance is still an issue with only one in four small to medium-sized enterprises having adequate insurance and 23 percent of business owners having no insurance at all.
“Brokers need to have frank discussions with their customers about adequate cover,” Tedford says.
“Business owners need to realise that they won’t just potentially be out of their premises in these sorts of events, but business could actually come to a complete halt which could cost them a lot in the long-run, or even put them completely out of business.”
Tedford says a wider discussion around climate change should also be had.
“Businesses need to think about their reputation, product relevance and how they’re doing their bit for the environment.”
Tedford believes it’s important the insurance industry also adapts and evolves with these changing risks, and that includes pricing adequately.
“It’s often under-reported how critical sustainability is within the insurance sector – but a robust insurance model is vital to New Zealand’s economy.”
