Resilient Communities: InvestMent

Our goal by 2025: There is a strong demand for fire and flood resilience investments and insurance is available and affordable for all Australians.

The Resilient Communities mission aims to shift the level of investment from response and recovery activities towards more preventative resilience activities. It will go about doing this in collaboration with public and private organisations.

An example of this is an initiative by Insurance Australia Group, National Australia Bank and the CSIRO who are piloting a resilience investment vehicle to direct public and private finance towards built, social and natural infrastructure that builds community resilience to climate disaster and derives a return for investors.

Lack of insurance, underinsurance and uninsurability are rising along with more frequent and severe disasters. Across Australia, non-insurance for homes is estimated at 11 per cent, and as high as 17-40 per cent in some areas. More broadly, 60 per cent of total annual disaster costs are uninsured.

Underinsurance is also an issue in disasters; for example, in the 2010-11 floods in south eastern Australia, almost half the house and contents insurance policies did not cover flooding. Climate-related ‘uninsurability’ is rising, with the number of uninsurable properties expected to increase from around 360,000 to 445,000 in the next 30 years due to climate-related risk.

Governments are seeking solutions to address this, including government-sponsored insurance pooling, government-backed reinsurance, and non-traditional insurance models to protect valuable assets against disaster risks.

Economic modeling of three Australian disasters indicates that insurance provided communities with stability after the initial shock. Additionally, the economic stimulus from claims payouts promoted a more rapid return to normal economic activity.

There is an opportunity here for innovative public-private partnerships to encourage resilience investment.

We need to shift the balance between investments in resilience versus recovery. We can support and amplify the efforts of insurers, governments and other organisations to explore new investment models. We can also find affordable and accessible solutions that incentivise behavioural change and protect life and property against fire and flood.