Real Estate and Insurability in New Zealand: Addressing a Growing Challenge

New Zealand is one of the most heavily insured countries in the world when it comes to natural hazards. However, recent disasters in Auckland, Gisborne, Kaikōura, and Canterbury have prompted a shift in how insurers assess risk. The traditional community-based pricing model is being replaced by risk-based pricing, where insurance premiums are calculated based on the specific natural hazard risks of each individual site.

This shift has major implications for property buyers, sellers, and real estate professionals. In high-risk areas, insurance premiums can increase significantly, or in some cases, insurance may be declined altogether, if a proper hazard assessment hasn't been carried out by a qualified engineer.

Many pre-purchase inspections focus solely on the structural integrity or condition of the property. While these are important factors, they do not evaluate natural hazard risks like flooding, landslides, liquefaction, or coastal erosion. As a result, relying solely on a builder’s or structural report is no longer sufficient when trying to accurately estimate insurability and long-term insurance costs.

To ensure smoother transactions and avoid unforeseen insurance surprises, early involvement of a natural hazard risk assessor is key. Engaging an experienced engineering professional to evaluate risks early in the sale process can:

• Help ensure the property is insurable at a reasonable premium

• Inform buyers and vendors of site-specific hazard risks

• Reduce delays and renegotiations during settlement

• Support informed decisions for all parties

In some locations, long-term insurance costs can be a major burden if hazard risks are left unchecked or underestimated. Being proactive can mean the difference between a successful sale and a failed deal due to insurance issues.

Buyers, sellers, and real estate agents across New Zealand must now factor natural hazard risk into their decision-making.

The figure below outlines a straightforward process for identifying and addressing natural hazard risks before they become costly problems.

By making natural hazard risk assessments a standard part of the real estate process, we can help ensure properties are safer, more insurable, and better protected from the growing risks of climate change and geotechnical hazards.