More than two million businesses and homes around Australia are at risk of abnormally high insurance premiums or insurance becoming unaffordable or unavailable due to climate related factors and natural disasters, a new report has found.

Published by the Climate Council using data from Climate Valuation, the At our Front Door report has quantified the risk of properties around Australia becoming uninsurable due to the risk of damage from climate related factors such as bushfire, flooding, coastal inundation, tropical cyclones and extreme wind.

According to the report, more than two million homes and businesses are at risk.

In particular, the report found that:

• One in 23 Australian homes and businesses (552,424 properties in total or 4.4 percent of the total) are at ‘high risk’. This means that the annual cost of extreme weather and climate related damage is expected to equal or exceed 1 percent of the replacement cost of the building. At this threshold, there is a significant risk of insurance becoming unaffordable or withdrawn entirely.
• A further 1.55 million properties (10.4 percent) are at ‘moderate risk’ where insurance premiums will be abnormally high due to weather related risks and there is a risk that insurance will become unaffordable.
• More than 72,000 homes and businesses are located in 86 suburbs categorised as ‘critical climate risk zones’. In such zones 80 percent or more of properties are classified as high risk and insurance may soon become unaffordable or withdrawn entirely. In suburbs such as Palmers Island on the Clarence River in north-eastern New South Wales, Seahampton near Newcastle and Stirling in the Adelaide Hills, every single property is at high risk. This is due to risks associated with riverine flooding in the case of Palmers Island and bushfires in the latter two suburbs.
• As global warming continues, exposure to climate risk will increase. Based on current warming trends, the number of properties which are at high risk is likely to more than double to 1.3 million by 2,100.

The latest data comes amid evidence that higher risks associated with extreme weather events are already on the rise.

In a report released last year, the Insurance Council of Australia indicated that the average value that was paid out by insurers to customers impacted by extreme weather events averaged $4.5 billion over the five years to 2023/24.

Some areas are particularly hard hit.

After the major floods in Victoria’s north central region in 2022, for example, residents in Shepparton found themselves on the receiving end of up to $30,000 annual increases in home insurance premiums.

Shepparton is one of the 86 aforementioned suburbs and towns that is critically vulnerable. It is vulnerable to flooding on account of its proximity to river systems and flat land.

The latest data also comes as Australia faces ongoing challenges in terms of the need to build more homes even as challenges associated with physical property risk and insurability are increasing.

This comes on top of concerns that there is insufficient focus on disaster risk management and prevention in housing and settlement policies.

In some cases, governments are acting.

In late 2023, the NSW Government abandoned proposals for two massive housing projects across the flood-prone Hawkesbury-Nepean Valley in Sydney’s west and scaled back plans for a third.

Climate Councillor and economist Nicki Hutley said that the report highlighted the impact of climate change.

“The climate crisis is literally at the doorstep of Australian households, as worsening extreme weather driven by climate pollution risks their greatest asset: the home,” Hutley said.

“We keep getting hit by disasters in Australia and that’s driving insurance bills through the roof, but we cannot insure our way out of this crisis.”

Climate Valuation founder Karl Mallon said that the data highlights how climate change is not a far-off event but is impacting communities already.

He encouraged decision makers at all levels of government to consider what actions may be needed to mitigate climate impacts and how these will be financed.

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