IAG New Zealand, one of the country’s largest insurers, has issued a warning that the current wording of the Planning Bill—intended to replace the Resource Management Act (RMA) of 1991—could limit the insurability of future developments in New Zealand. The insurer has informed Parliament that ambiguities in the bill’s approach to ‘proportionate’ and risk-based planning may influence how land-use decisions are evaluated, potentially affecting underwriting practices, insurance pricing, and the broader lending market.

Insurance Industry Concerns

The warning comes as the government seeks to overhaul the RMA, which has governed land use and environmental controls in New Zealand since 1991. IAG has highlighted that the new legislation’s treatment of risk, particularly in relation to natural hazards, could create uncertainty for insurers assessing the viability of insuring new developments. This could, in turn, lead to higher premiums, reduced coverage options, or even the withdrawal of insurance for high-risk properties.

According to IAG, the Planning Bill’s emphasis on ‘proportionate’ planning may not adequately account for the long-term risks associated with natural disasters such as flooding, landslides, and extreme weather events. The insurer argues that without clear definitions and standards, the risk assessment process could become inconsistent across different regions and development types.

Impact on Property Developers and Homeowners

The potential changes to the RMA could have significant implications for property developers and homeowners. If insurers perceive higher risks due to unclear regulatory frameworks, they may be less willing to underwrite policies for new developments, particularly in areas prone to natural hazards. This could lead to a shortage of affordable insurance options, increasing the cost of home ownership and potentially stifling development in high-risk areas.

For homeowners, this could mean higher insurance premiums or even the inability to secure coverage for their properties. In some cases, banks may also become reluctant to offer mortgages for properties deemed too risky, further limiting housing options in vulnerable regions.

According to a report from IAG, the lack of clarity in the Planning Bill may also affect the lending market, as financial institutions rely on insurance to mitigate risk. If the new legislation creates uncertainty, it could lead to a more conservative approach from lenders, potentially reducing access to credit for property buyers and developers.

What Analysts Say

Industry analysts have echoed IAG’s concerns, noting that the transition from the RMA to the Planning Bill is a critical juncture for New Zealand’s regulatory landscape. Dr. Sarah Thompson, a land-use policy expert at the University of Auckland, said, ‘The success of the new legislation will depend on how well it balances environmental protection with the economic realities of development and insurance. If the risk-based planning framework is not clearly defined, it could create a regulatory vacuum that leaves both insurers and property owners in limbo.’

Other experts have pointed out that similar issues have arisen in the past when regulatory changes have failed to account for the complexities of risk assessment. For example, the 2004 changes to the RMA, which aimed to simplify land-use planning, led to increased uncertainty in the insurance market, resulting in higher premiums for properties in high-risk areas.

The Planning Bill is currently under review by Parliament, with a final decision expected by mid-2025. During this time, industry stakeholders, including insurers, developers, and environmental groups, are lobbying for amendments to ensure that the new legislation adequately addresses the long-term risks associated with natural hazards.

IAG has called for the government to provide clearer definitions of ‘proportionate’ planning and to ensure that the new framework includes mechanisms for assessing and mitigating natural hazard risks. The insurer has also urged policymakers to engage with the insurance sector to ensure that the new legislation does not inadvertently create barriers to development and homeownership.

As the debate over the Planning Bill continues, the insurance industry remains watchful, fearing that the new legislation could lead to a fragmented and unpredictable regulatory environment. For ordinary New Zealanders, the outcome of this debate could have lasting implications on housing affordability, property insurance costs, and the availability of mortgages in high-risk areas.