New Zealand's $64 Billion Spend On Natural Hazards Heavily Skewed To Recovery Over Resilience
Press Release – IAG New Zealand
Amanda Whiting says: It is clear we need to do more to reduce natural hazard risk, especially when we know that there is a strong case for doing so. International research shows that a dollar invested in risk reduction can reduce spending on response and …
Research commissioned by IAG New Zealand shows that the Government has spent at least $19 billion on responding to natural hazards since 2010, and a further $14 billion through its public insurance schemes.
When the $31 billion spent by private insurers is included, the total cost of natural hazards since 2010 is $64 billion. Adjusted for inflation this equates to an average of $5.5 billion per year, of which the Government's share is about half.
IAG New Zealand CEO Amanda Whiting says: 'This research highlights again the significant financial cost that natural hazards have on New Zealanders, and the urgent need to reduce their impacts.
'These costs represent a drag on our economy and work against the growth and financial strength required to support the needs and aspirations of New Zealanders.'
The research also shows that 97% of the Government's expenditure was on responding to and recovering from natural disasters, with the response to the Canterbury earthquakes, Kaikoura earthquake and the North Island weather events of 2023 dominating spending. Only 3% was spent on risk reduction and resilience.
The total amount spent, will in fact, be much higher. This is because this research does not include significant spending by local government, such as the $8.2 billion that the Christchurch City Council is projected to ultimately spend on recovery in response to the Canterbury and Kaikoura earthquakes. It also does not include the wider social and economic costs which Deloitte suggests could account for at least 50% more cost [1].
Amanda Whiting adds: 'It is clear we need to do more to reduce natural hazard risk, especially when we know that there is a strong case for doing so. International research shows that a dollar invested in risk reduction can reduce spending on response and recovery by four dollars [2].
'Reducing natural hazard risk is as much about improving the decisions we make as the money we spend to improve the safety and resilience of our homes, businesses and infrastructure.
'It is also clear from this research that New Zealand has an incomplete understanding of the costs of its natural hazards. Fixing this will enable better decisions to be made on when, where and how to reduce risk. This is becoming even more important as natural hazard events increase in frequency and severity.
'We need to prioritise improving how the actual costs of natural hazard events are recorded by central and local government, so that we know how much we are spending, on what and where. Alongside this, we must quickly move to understand the underlying trends, regularly model the expected financial impact of natural hazards, set relative benchmarks and closely monitor changes in risk over time.
'IAG continues to invest significantly in data and its application to improve decision making and is working with government and other partners to put this capability to use in improving how natural hazard risk is managed. This is a priority for us and must be a priority for New Zealand.'
Research conducted by Sapere Research Group.
[2] Mechler, R. Reviewing estimates of the economic efficiency of disaster risk management: opportunities and limitations of using risk-based cost–benefit analysis. Nat Hazards 81, 2121–2147 (2016)
About IAG:
IAG New Zealand is the largest general insurer in the country, trading under the AMI, State, NZI, NAC, Lumley and Lantern brands, as well as providing the general insurance products sold by ASB, BNZ, Westpac and The Co-operative Bank. IAG New Zealand employs over 4,000 people, holds relationships with one in every two New Zealand households, and insures over NZ$1.07 trillion of commercial and domestic assets.
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