- The rising cost of home insurance could threaten Australia's financial system
- The risk is identified in a new report which found one in four Australian homes may not be adequately insured by 2050
- The assessment was released by financial watchdog APRA examining two plausible climate-related scenarios
Financial regulator APRA warns climate-driven pressures on insurance premiums could see one in four Australian homes without adequate insurance by 2050.
The Insurance Climate Vulnerability Assessment examined falling insurance coverage under two climate-related scenarios over the next 25 years.
Under both scenarios, upward pressure on insurance premiums posed increasing risks to Australia's financial system, the report found.
APRA said affordable and widely held home insurance is vital in protecting households against large and unexpected financial losses, enabling them to recover quickly after shocks.
The regulator said this is also necessary to support a resilient and productive economy.
Home insurance increasingly out of reach
The APRA report estimated one in seven Australian houses are currently uninsured with another one million homes expected to have inadequate insurance by 2050.
Regional and rural communities would be disproportionately affected, the report found, with the protection gap widening in areas that already have low insurance coverage.
One scenario found expected losses from weather-related events could rise from around $7 billion today to more than $16 billion by 2050.
The other scenario, assessing a transition to a lower emissions economy, meant less severe weather impacts but still saw ongoing premium increases driven by significant hikes in construction costs.
Independent data shows Australian home insurance premiums climbed an average 51% in the past five years to 2025.
Households - and banks - the losers
The APRA report found the widening gap between the insured and uninsured could see more households hit with financial losses that aren't covered, in turn heightening credit risks for banks.
It said these pressures could erode the resilience of Australia's financial system over time.
In response, the Insurance Council of Australia said the risks identified are already playing out.
"Worsening extreme weather, combined with inflationary pressures, rising asset values and insurance taxes, is widening the gap between those who can and cannot access insurance in areas of highest risk," the Insurance Council said.
It cited one analysis showing 25% of the cost of repairing or building properties damaged by flood is driven by just 11% of the most at-risk properties.
Call for more government help
The Insurance Council has called on governments to increase investment in programs to combat extreme weather events such as flood defence systems and a national hazard database.
It also wants more resilience investment in highest-risk locations, tax reform on insurance premiums, new land use planning, and better insurer-government partnerships.
The APRA report, released on Tuesday, is not a forecast but a stress test considering two plausible climate-related scenarios.
The study involved five of Australia's largest insurers accounting for around 80% of the current home insurance market.
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| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.99% p.a. | 6.02% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
| Promoted | Disclosure | ||||||||||
5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
