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4 December 2018
New Zealand’s a risky place. New Zealand ranked high risk for just about every natural disaster The Global Facility for Disaster Reduction and Recovery could think of: earthquakes, tsunamis, volcanoes, floods, landslides and cyclones - though not extreme heat or water scarcity.
The Global Facility for Disaster Reduction and Recovery looks at the risks posed by natural disasters. Users can use their online tool, ThinkHazard, to look at the overall risk factors for countries, regions or even cities.
New Zealand is ranked as the second riskiest country in the world when it comes to natural disasters, according to Lloyds’s of London study: A World at risk: Closing the insurance gap. We sit only behind flood-prone Bangladesh.
Chile, also prone to earthquakes, ranks third followed by China, Vietnam, Indonesia, Thailand, Turkey, Philippines and Japan.
Lloyd’s insurance risk index report, which ranks 43 countries on their expected loss from natural disasters, estimates an annual expected cost for natural disaster damage. They look at the probability of a natural disaster happening and multiply that by the cost to property.
The expected annual cost for New Zealand, for example, is 0.66 per cent of the country's GDP, compared to 0.83 per cent for Bangladesh and 0.65 per cent for Chile.
But there is some silver lining to be found. New Zealand is one of the most insured countries in the world. In term of insurance penetration, "New Zealand is still among the top countries but has slipped from 2nd to 4th place," Lloyds found. New Zealand sits behind The Netherlands, South Korea, and the United States.
New Zealand is continuously faced with extreme weather events. "After the Christchurch earthquake of 2011, which caused damage equivalent to 14 per cent of the country's GDP, the country has suffered from further seismic events and several significant floods”, the report added.
However, insurance coverage has fallen since the Christchurch earthquakes of 2011. “After an initial flurry of insurance uptake in the wake of the Canterbury earthquakes, appetite for these products has slowed in recent years.”
The report demonstrates that New Zealanders understand the value of insurance, and just how vulnerable New Zealand is to natural disasters, but relatively high insurance penetration rates doesn’t necessarily mean all assets are sufficiently well covered.
After the Canterbury earthquakes, changes to home insurance policies from "total replacement" to "sum insured" has meant the onus is on homeowners to estimate the cost of replacing their home.
Perhaps people are under-estimating the cost to replace their assets, which could leave them vulnerable.
The acknowledgement that New Zealand is such a risky country could be a timely reminder for people to check that their homes, possessions and cars are adequately insured; that there is enough cover to fully replace them.
At Crombie Lockwood, we recommend everyone look at their current cover every year to ensure it's fit for purpose and will provide what you need in the event of a total loss. If you need help, get in touch with one of our brokers to discuss and assess your current and future insurance needs.