Insurance Brokers Concerned About Poorly Understood Risk In NZ’s ‘Choicest’ Suburbs

The Bay of Plenty seaside suburb of Papamoa was recently crowned Trade Me’s ‘choicest suburb’, but the Insurance Brokers Association of New Zealand (IBANZ) is concerned an insurance exposure impacting some properties in Papamoa - and other areas of New Zealand at risk of natural hazards – is not well understood.

Papamoa, Southshore in Christchurch and Morrinsville in Waikato were the three finalists for Trade Me’s choicest suburb title. However, IBANZ Chief Executive Mel Gorham says all three may contain properties prone to natural hazards such as flooding and inundation, erosion, subsidence, falling debris or slippage, which can cause local authorities to put Natural Hazard Section Notices on their titles.

As outlined on the Natural Hazards Commission (NHC) website, these notices give NHC discretionary power to fully or partly decline the up to $300,000 of cover it provides if damage is caused by the same type of natural hazard specified on the Section Notice.

Gorham advises the situation could be worse in some cases as some private insurers will only pay out once the NHC accepts its portion of the claim. “This could leave the property owner with no cover at all for what is likely to be the most significant natural hazard their property faces.”

Natural Hazard Section Notices are a response by local authorities to Section 72 of the Building Act which obliges them to issue a building consent in an area where there is a known natural hazard if the building work will not make the hazard any worse.

Natural Hazard Section Notices are intended to make anyone with an interest in the property such as potential buyers, banks, lenders and insurers aware of the risk. However, IBANZ believes the implications for NHC and insurance cover are not well enough understood and need to be factored into decisions about where to live - even in the ‘choicest’ neighbourhoods.

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