MANDATORY DISCLOSURES of all known present and predicted risks to property should be required in all property transfers, according to the insurance industry.
The Insurance Council of Australia says Australian governments should coordinate disclosure of weather-related risks to property across the country as a first step towards ensuring individuals are mitigating their own exposure to climate change.
In submissions to the Garnaut Climate Change Review, both the Insurance Council of Australia (ICA) and the Institute of Actuaries of Australia (IAA) have highlighted how the difficulty of providing cover for some types of natural disaster will be exacerbated by the increased frequency of adverse weather conditions.
“Risk disclosure to community members who currently own property or who consider a purchase of property is a …crucial issue,” said the ICA in its submission.
“Measures to actively provide community members with best known risk data, both extant risk and agreed predictive data, will place individuals and communities in the best position possible to make decisions regarding the weather risks they are prepared to tolerate in a location and most importantly, decisions regarding the adaptive behaviours they may undertake to accommodate those risks.”
It suggested a scheme be set up by the Council of Australian Governments (COAG) requiring each state to publish government-endorsed “risk data” on past temperature extremes, coastal inundation, extreme rainfall events, windstorm, hail, bushfire and flooding, and projected changes to these risks over the next 100 years.
“Climate change commentary and litigation has already commenced and appears to be on a similar trajectory to the history of liability presented by dust diseases and tobacco smoking in the ’50s and ’60s,” the ICA said. “It is conceivable that the restriction, intentional or otherwise, of risk information from an individual business and/or government concerning known or predicted climate change risks that could influence a purchase, development or lifestyle choice could open further issues of liability on behalf of the individual business and/or government responsible for the information.”
As the scientific evidence grows that previously unconnected weather-related damage now has a common cause, this would make it more difficult for the insurance industry to spread the risks, said the IAA.
“The provision of insurance is premised on the ‘rule of large numbers’such that risks are spread,” the IAA notes. “The diversification of risks available from largely independent events allows insurers to operate with capital well below the total level of sum insurance coverage provided.
“The greater the correlation of risks, the greater the requirement of insurers for access to capital and/or reinsurance, with a consequent increase in costs. Climate change, particularly if coupled with increased concentration of exposure in vulnerable locations, may exacerbate correlation of risks.”
The ICA has also recommended the Council of Australian Governments coordinate new national land use planning and zoning requirements that don’t permit development on land that is or will be at more at risk from extreme weather events.
Based on predictions by the CSIRO that cyclones will become less frequent but more intense and extend their range further south in Australia, the ICA says the area where cyclone-proof building standards apply should be extended down to the 33rd parallel – which runs through Newcastle in New South Wales.
These new planning regulations should also not allow residential or commercial development on land that is now or predicted to be subject to a 1:50 average return interval (ARI) flooding or storm surge risk within the next 100 years, the ICA said, unless there is flood or storm surge mitigation works incorporated into development plans that reduce the risk to a minimum of 1:100 ARI risk.