Ten regions in which home and property owners are likely to find that they are not able to affordably insure their homes against major natural disasters in the future have been identified.

In its latest research, online financial brokerage firm Savvy has used data and modelling from various sources over the short, medium and long term to identify electoral regions in which a large number of homes are likely to be at high risk of damage due to flooding, bushfires, coastal erosion and/or extreme wind.

Where this is the case, insurers are unlikely to offer home and contents cover at an affordable price and the properties are likely to be uninsurable.

At the top of the list is Greater Shepparton in Victoria, which encompasses Greater Shepparton, Campaspe, Mitchell and part of Strathbogie.

Courtesy of a flat topography, the Shepparton, Mooroopna and Murchison areas are susceptible to flooding. The area has experienced major floods in 1916, 1917, 1939, 1956, 1958, 1974, 1993 and 2010/11/12.

All up, 27.4 percent of the 94,280 properties within the areas are at high risk of riverine flooding (where a river breaks its banks and floods) whilst a further 1.5 percent are at high risk of surface water flooding (flash flooding after heavy rain).

By 2030, 1,607 properties in this area will be at high risk for surface water flooding and a further 2,140 properties will be at medium risk of flooding.

Next, there is the Tweed/Byron/Ballina region in the north of NSW bordering Queensland.

This includes major regional centres such as Byron Bay, Hastings Point, Tweed Heads, and Mullumbimby.

Of 106,455 properties, 20.9 percent are considered high risk with 14.5 percent at high risk of riverine flooding, 5.2 percent at high risk of bushfire exposure and 0.4 percent at risk of surface water flooding.

Concerningly, these areas are located in the lower-than-average income of Federal electorate of Richmond – a phenomenon which Savvy suggests may indicate that extreme weather events are being experienced by those who can least afford them.

The third most significant area of vulnerability is the Maranoa River area in Queensland, which is bundled up into a regional electorate covering almost 750,000 square kilometres on the southwestern corner of Queensland. Towns located in Maranoa include Charleville, Cunnamulla, Dalby, Roma, Kingaroy, St George, Stanthorpe, Winton, and Warwick.

As well as the Maranoa River, this region is also home to The Condamine-Balonne River system, one of the major tributaries of the Murray-Darling river system.

Of a total of 132,078 total properties, 14.8 percent are at high risk of extreme weather events. Of these, 13.9 percent are at high risk of riverine flooding, and 0.6 percent are at risk of bushfires.

In the regional town of St. George, Savvy warns that as many as 70 percent of properties will be uninsurable due to flood risk by 2030.

Fourth, there is the critical tourism area of Surfers Paradise/Gold Coast, which has experienced more than 20 floods of varying degrees since 1958.

Of the 131,924 properties which are established in the area, 13.7 percent are at high risk. This includes 11.9 percent which are subject to riverine flooding, 1.7 percent which are subject to surface flooding and 0.1 percent which are at high risk of bushfire.

By 2030, 45 percent of houses in Broadbeach Waters will be at high danger of riverine flooding. This is followed by Mermaid Waters and Surfers Paradise, where about 25 percent of buildings will be at high risk at the same time.

Rounding out the top five is the Lockyer Valley and Scenic Rim area in Queensland, which spans about 7,500 square kilometres of the Gold Coast hinterland, the area between Logan and the New South Wales border and the Lockyer Valley west of Ipswich.

Of 88,952 properties, Savvy says 13.6 percent are at high risk. This includes 9 percent which are of properties are at high risk of bushfire; 3.6 percent which are at high risk of riverine flooding and 0.4 percent are at high risk of surface water flooding.

By 2030, Savvy says fire risk will impact a significant number of properties in the communities of Yarrabilba, Canungra, Greenbank, Kairabah, and Jimboomba.

The latest analysis comes amid ongoing concerns that global warming will lead to more frequent and more severe extreme weather events.

For property owners, this raises concern about rising insurance premiums and their ability to obtain insurance.

In a recent report, the Climate Council of Australia said it expects a total of 520,940 properties (one in every 25) to be at ‘high risk’ and uninsurable by 2030.

A further 9 percent of properties are likely to reach the medium risk category by this time.

A property is considered to be high risk where the expected annual damage costs equate to more than one percent of the property replacement cost.

Where this happens, insurers are unlikely to offer home and contents coverage at premiums which are affordable to property owners. Such homes are then effectively rendered unaffordable.

Properties are also considered to be of medium risk with the expected annual damage costs range between 0.2 percent and 1.0 percent of the property replacement costs.

According to Savvy, these properties are at serious risk of becoming underinsured.

Commonly speaking, homes and properties at either high or medium risk have one or more of several features. This includes living on a bank of a river which is prone to flooding, being located directly in the path of cyclones or living in areas which become tinder dry in summer and thus prone to bushfires.

Courtesy of its flat topography and proximity to river systems, more than a quarter of homes in Greater Shepparton are at high risk of flooding damage.

For its analysis, Savvy used a combination of modelling from the CSIRO, Universities of New South Wales and Queensland and the US National Oceanic and Atmospheric Administration along with data from Climate Valuation, to derive what’s known as the Maximum to Date Value at Risk (MVAR) of extreme weather and climate hazards.

This is essentially the annual risk of damage to an asset. Properties with an MVAR in excess of 1% of the total replacement cost is considered “high risk” – and as such, insurance companies will either set premiums beyond what is normally affordable, effectively refusing to insure a dwelling.

Climate Valuation has extrapolated these extreme weather and climate hazards to the year 2030, 2050, and even 2100 using a set of data known as Climate Risk Engines. The Climate Risk Engine takes climate and weather data from a certain area and assumes each dwelling is a single storey detached house which uses recent design specifications and materials.

Beyond the five areas referred to above, Savvy warns that other areas risk becoming uninsurable as climate risks increase.

According to research published by the ABC, almost 20 percent of properties in the Alice Springs will be uninsurable by 2100, with similar numbers on the Sunshine and Gold Coasts. Mackay will be about 15 percent uninsurable, with Newcastle-Maitland being about 12 percent uninsurable over the same timeframe.

Savvy CEO Bill Tsouvalas warns that this could have significant implications for both house prices in these areas and the ability of home owners to gain access to finance.

“No one will want to live in an uninsurable property and a lender will shy away from providing finance for it either – it could very well mean the death of some towns as they become uninhabitable from not just a climate perspective but economically” Tsouvalas said.

 

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