A national analysis by XDI and Climate Risk Engines has analysed the extreme weather related risks of climate change for all Australian local government areas. The report makes compelling reading for insurers and local government, to be aware of the respective risks to insureds and local residents. It also generally highlights the need for businesses to be aware of the physical risks to their property.
Some key findings include:
- 383,000 properties classified as 'High Risk Properties' for climate related extreme weather events by 2020. This number will increase to 735,000 in 2100 for existing properties alone.
- Total annual costs of damage from coastal inundation is projected to increase by 111% between 2020 and 2100.
- Between 2020 and 2100, the total annual costs of damage from flooding is projected to increase by 29%. One in five LGAs will have these annual costs of damage double due to flood.
- Total annual costs of damage from forest fire is projected to increase by 54% between 2020 and 2100.
- Between 2020 and 2100,the total annual costs of damage from subsidence risk is projected to increase by 36%.
The findings of this report have implications for insurers, business and government, in particular:
- The need to ensure that losses are appropriately insured and premiums accurately modelled to predict this risk;
- The need to ensure that local and state governments are building, planning, and approving development and infrastructure which will be resilient to the modelled risks in that location;
- That businesses, developers and investors should consider the potential risks to their business or investment relating to modelled extreme weather events. This creates impetus to quantify and manage such risks, such as risks of stranded assets if holdings in high risk areas never realise their full development potential or must be abandoned.
Failure to manage such risks may potentially sound in litigation risks, for example, shareholder litigation relating to failure to appropriately manage investment risk, or third party claims against government or infrastructure operators for failure to mitigate harm during extreme weather events.
Climate Change Risks to Australia’s Coast – A First Pass National Risk Assessment was released by the Australian Government Office of Climate Change and Energy Efficiency in 2009. The national risk assessment focussed on the risks to settlements and infrastructure, natural ecosystems, and industries in the coastal zone. That report found that between AUD $41-63 billion dollars worth of properties were at risk from coastal impacts. In the ten years since that report, there have been improvements in the sophistication and detail of climate models as well as substantial increases in computing power... This XDI Second Pass Assessment considers a greater number of hazards, covers all municipal areas in Australia and seeks to provide a firm basis for continued awareness and policy development to secure Australia’s resilience. If governments and communities act on this information now, many of the projected losses can be averted. Acting in an orderly way with a strategic focus on those communities most at risk will ensure that adaptation is achieved at least cost. The analysis underpinning this report can be used to identify where action is necessary, what activities need to be undertaken and when. We encourage all readers to consider the implications of the trends and results, and act to keep people safe from physical and financial harm.