The fires and floods across the northern hemisphere, presaged by similar catastrophic events in Australia, New Zealand and Africa recently, have put the spotlight on climate change mitigation and adaptation and people are asking are some regions uninsurable?

In New South Wales the town of Lismore is a regional centre of about 29,000 people. It was founded in 1855. It sits on a lush alluvial plain. It contributes some $2.6 billion yearly to the national economy. But it’s also being seen as the canary in Australia’s climate change-afflicted coal mine.

“I will point out Lismore is a town to keep a close watch on,” Insurance Council of Australia Executive Director and CEO Andrew Hall told the Climate Adaptation 2023 conference in Adelaide.

“Even though there is a lot of community anxiety in Lismore around what is happening there, the reality is the 1100 homes being bought back and demolished in the community is probably Australia’s most significant climate adaptation program ever undertaken.”

It’s a town that has to change with the times, he said.

“It is a community under a lot of strain and stress, and we need to support them,” he told the gathering of Australian climate researchers, investors, planners, legislators and advisors. “But equally, we can’t leave people living where they are because 14 metres of water moving at 18 metres per second went through their homes. It’s simply dangerous. And it’s uninsurable. It’s really a town that was built completely in the wrong location. So we’ve got to work very hard to correct that.”

But Hall added Lismore was just one of 12 communities around Australia identified as facing such an extreme and sustained level of disaster risk.

“There’s more that are regional areas,” he said. “And Western Sydney has the largest population in the southern hemisphere with a flood exposure. So we’ve got a real challenge on our hands across our country.”

“Some impacts of climate change are now unavoidable, and we will need to adapt,” Assistant Minister for Climate Change and Energy, Senator Jenny McAllister, told the conference on Wednesday morning.

“But for too long, adaptation has been the unloved and overlooked child of the climate policy. And that past neglect has been a mistake.”

McAllister said a $27.4 million National Climate Risk Assessment and National Adaptation Plan was due to be delivered in 2024.

“It will mean that for the first time, we will have a national picture of the risks we need to address together,” she said.

It’s a challenge being faced by every industry, government and community in the country, she said. “People care deeply about what happens in their communities and at the local level. They care about dying rivers in their towns. They care about heat island effects caused by overdevelopment, or poorly planned development. And they care about rising insurance premiums.

“Local issues motivate us often more than anything else. They also happen to be manifestations of some of the key issues that climate adaptation policy asks us to consider.”

CSIRO Principal Sustainability Economist Dr Russ Wise pointed to a 2020 Australian Prudential Regulation Authority (APRA) report recommending a yearly $3.5 billion investment in national climate disaster mitigation projects. This money, it said, would prevent having to spend more than ten times that amount on repair and recovery efforts.

The problem, Wise says, is the current level of investment is only about half a billion each year.

“Then you can look at this other annual figure – $12 billion – for AUKUS (eight nuclear-powered submarines).

“Now, to my mind, this is a number that I actually think gives us hope. It really does show that Australia can create a vision for a safe and secure country, about what is required to get there and commit the investments to get us there.”

The cost of recovering from the Back Summer bushfires of 2019-2020 has been estimated to be about $100 billion. Now we have to add the 2021-22 floods to that bill.

“It actually has significant implications for our financial system, with many reinsurers and insurers really suffering,” he said. “And this is happening across the world. There are particularly stark and terrifying examples in the United States at the moment with large areas becoming totally uninsurable.”

But the challenge is about more than economics, he said.

“People and nature are suffering. Extreme heat, extended heat waves, inappropriately designed homes and living in environments are causing immense morbidity and challenges to people. We’ve got significant problems with droughts causing immense changes to our ecosystems and agricultural sector. Extended periods of smoke are causing all sorts of health issues, mobility challenges, and mortality.

“And extensive and extended periods of inundation are also causing significant community social and environmental issues. And then, obviously, recovering from catastrophic events also causes trauma, suffering, and exhaustion. So we need substantial and urgent investments to address and mitigate these challenges.”

Mr Hall said it was a process the insurance industry was keenly engaged in.

“Insurance is actually where the immediate financial impact is being felt by people when it comes to the question of the resilience and the durability of where they live in Australia, the environment and climate, which we live in,” he said. “So what that means as a community is that we have to build an environment capable of withstanding what we have to live through.”

Since 2019, Australia has had 13 declared insurance catastrophes.

In 2022, the industry paid out $6 billion over and above the typically expected yearly figure, with five million claims received.

“So one in four Australians made an insurance claim last year – and that has a flow-on effect,” he said. “We do have a situation in Australia where the traditional home and contents insurance product is under a lot of pressure. On average around Australia for the last year, for every dollar collected on home insurance premiums, $1.04 was spent.”

And the cause of that unsustainable change is easily identifiable, he added.

“Insurance premiums are being driven by three factors in this country. It’s being driven by the extreme weather events that have impacted the insurance pools over the last few years. It’s being driven by the fact that inflation in the building sector has massively increased costs. So when buildings are destroyed, it costs a lot more money to replace them. And our reinsurance costs have dramatically risen internationally.”

He added that any given community’s premiums will come down if they demonstrate they have reduced their exposure to a disastrous event.

“So that means that when we go into the global market, we have to tell a better risk story,” Hall explained. “We have to be able to prove to reinsurers based out of London and Zurich in Munich that we are not California. That we are not the sort of place that allows development wherever and to whatever standards developers want.”