RBA, APRA warn of rising costs to insurance from climate change

Labor senator Jenny McAllister. Picture: Sitthixay Ditthavong
Labor senator Jenny McAllister. Picture: Sitthixay Ditthavong

Australia's central bank and the prudential regulator have flagged climate change will bring added costs, particularly in the price of insurance premiums.

Fronting estimates on Thursday, the Reserve Bank of Australia and the Australian Prudential Regulation Authority confirmed both regulators were in the process of internal climate change modelling and the impacts global warming will have on the nation's financial framework.

The concessions come after the RBA last month flagged not adopting an emissions reductions policy could threaten overseas investment into Australia and see more capital flow offshore.

In its hearing, APRA flagged insurance costs will likely increase due to climate change.

When questioned by Labor senator Jenny McAlister, the prudential regulator said insurers are factoring in climate change risks within insurance premiums.

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"Those risks are real," APRA chair Wayne Byres said, who also noted the banking industry is currently undertaking a climate vulnerability assessment.

Mr Byres said there is no hard evidence climate change risks are being costed into mortgage premiums currently, but said there are "potential" future concerns which the regulator is aware of.

Deputy chair Helen Rowell also added: "climate risks may play out and impact the affordability and availability of insurance".

Deputy RBA governor Guy Debelle confirmed climate modelling in conjunction with APRA would be released next year.

Dr Debelle also probed by Senator McAllister and claimed the modelling would be based on a range of scenarios, including varying degrees of climate change and its respective economic impact.

"Hopefully we land that sometime next year," Dr Debelle said.

On a separate topic, assistant RBA governor Michelle Bullock said the New Payments Platform was fundamental during the pandemic.

Ms Bullock said more than 17 million COVID-19 disaster payments were administered through the NPP and allowed people to be paid in real-time.

Dr Debelle also noted the COVID-19 pandemic had created job shortages in certain sectors.

He said while labour shortages ensue, it would create upward pressure on wages growth.

This story Climate change to hike insurance costs first appeared on The Canberra Times.