Insurance companies are taking individual approaches to assessing coverage in farming areas facing heightened natural hazards as climate change reshapes the industry’s risk calculations across New Zealand.
FMG said it evaluates each client’s circumstances separately in locations with elevated flood or other natural disaster risks, rather than applying blanket policies to entire regions.
“For areas of heightened natural hazard, including flood risk, FMG takes a case-by-case approach considering individual client circumstances of that location to ensure we fully consider the level of risk to understand insurability – rather than a blanket approach,” an FMG spokesperson said.
The company’s position follows AA Insurance temporarily halting new home insurance policies in multiple locations. The insurer stopped new policies in Westport due to flood risk, in Woodend, Rolleston and Lincoln because of seismic risk, and in Blenheim, where residents reported being declined coverage, according to RNZ.
AA Insurance head of underwriting Dee Naidu said managing risk exposure was common practice in the insurance industry and the list of areas with temporary restrictions was not static.
“We are always monitoring where we are growing and the accumulation and exposure to risk from that growth,” Naidu said.
FMG said the geographical spread of farms across New Zealand meant its risk was well distributed over a wide area, helping the company manage exposure to localised disasters.
The insurance industry adopted risk-based pricing within the last decade. Under this model, policyholders essentially transfer risk to insurers, who then determine whether they can accept that risk, the FMG spokesperson said.
“If an insurer takes on too much risk in one location, this could impact its ability to pay claims or get reinsurance following a large-scale event such as a flood or an earthquake,” the spokesperson said. “Taking on the right level of risk is a prudent step in ensuring the business can respond to events and in turn remain solvent to be there for all clients when the unexpected happens.”
