Australian Prudential Regulation Authority publishes Insurance Climate Vulnerability Assessment showing uninsured homes could rise to one in four by 2050

The Australian Prudential Regulation Authority has released its Insurance Climate Vulnerability Assessment, a prudential stress test examining how climate-related pressures could affect home insurance affordability and widen Australia’s home insurance protection gap to 2050. APRA estimates around one in seven Australian houses were uninsured in 2024 and finds this could rise to around one in four by 2050 under two severe but plausible climate scenarios, equivalent to an additional one million homes without adequate insurance. The assessment indicates regional and rural communities would be disproportionately affected, with the protection gap projected to exceed 40% in rural areas by 2050 under both scenarios. In the higher physical risk scenario, more frequent and severe weather events are the main driver, with expected annual weather-related losses rising from around AUD 7 billion to more than AUD 16 billion by 2050; in the higher transition risk scenario, sustained construction cost inflation is the dominant driver of premium increases. APRA highlights that a widening protection gap could increase uninsured losses for households, heighten banks’ credit risk in high-risk regions, constrain growth in the home insurance market and increase reliance on government support after weather events. APRA conducted the exercise with five large general insurers (Allianz, Hollard, IAG, QBE and Suncorp), covering around 80% of the home insurance market by gross written premium, using scenarios aligned to the Network for Greening the Financial System and assuming no additional policy or physical adaptation measures. APRA said it will continue to engage with government, industry and other regulators to share insights and support efforts to manage prudential risks associated with declining insurance coverage.