So, what if we are not inclined to insure our homes for whatever reason; so, what if a sizeable lot do not have ‘regular’ homes? Incidentally around sixty-five million individuals, which constitutes 17.4% of India’s urban population, are slum dwellers. So, what if all Australian population equals that of greater Mumbai?!

As the percentage of urban population grows – and as the climate breakdown intensifies in the next two decades when we aspire to insurance for all – the insurance penetration of homeowners must scale up in some innovative ways.

The Australian Prudential Regulation Authority (APRA) is the national regulator responsible for ensuring the stability, safety, and efficiency of Australia’s financial system, including insurance.

It recently conducted the Insurance Climate Vulnerability Assessment (Insurance CVA) stress test to better understand the insurance protection gap for Australian homes, how it may change into the future, and the risks it may pose to Australia’s financial system.

APRA’s assessment shows that insurance affordability is becoming a structural economic issue in climate-vulnerable markets. When more households cannot afford cover, losses shift onto families, lenders, and governments.

Notwithstanding the fact that the key focus of this Australian initiative centres around homes. We have a lot to learn from Oz for our diverse asset class.

Widening protection gap in Australia

APRA found that the share of households likely to go uninsured could rise from about 1 in 7 today to 1 in 4 by 2050 under both of its stress scenarios. The underlying drivers of the increase differ by pathway. In the higher physical risk scenario, rising weather losses are the main source of pressure, with expected annual weather losses increasing from less than $7 billion in 2024 to more than $16 billion by 2050.

In the delayed transition scenario, construction cost inflation and weaker income growth are the bigger affordability problems. The burden is not evenly spread. Regional and rural areas are expected to be hit hardest, with more than 40% of rural households potentially uninsured by 2050.

The Australian federal and state governments have started shifting from a reactive to a proactive disaster management approach, notably through initiatives like the Disaster Ready Fund, which aims to invest AU$1 billion over five years in resilience projects.

Insurers themselves are also investing in community education, retrofitting programs, and risk research. However, resilience funding still represents a small fraction of disaster recovery spending – estimates suggest less than 3% of disaster-related expenditure in Australia goes toward pre-event mitigation.

Australian actuary Ramona Meyricke believes: “One of the simplest and most effective steps to reduce climate and natural hazard risk is to stop new residential development in high and extreme risk zones now. Existing flood and coastal hazard data already show where risk is unacceptably high – and there is broad agreement that climate change will further increase those risks over time. There is no need for more modelling to show most high flood-risk areas today will be even higher risk tomorrow (absent major mitigation like levees). Preventing new housing in these locations is a clear, evidence-based risk reduction measure.”

Some assorted challenges: India

Climate scientist Dr. Chirag Dhara and others put together a map of India illustrating the climate hotspots. We stand besieged on all sides. The entire Himalayan arc is category VI earthquake zone and almost 60% of our landmass is moderate to high-risk terrain. Construction codes need a revisit.

The impact of rising heat caused the central Himalaya and Central Asia mountain ranges Tian Shan, twenty-three out of twenty-four glaciers, to lose ice mass, leading to an increase in glacial lake outburst floods (GLOF) and landslides. Uttarakhand and Sikkim are live case studies from the immediate past.

Anna Hurlimann and Sareh Moosavi write in The Conversation that “climate change should be a key consideration for designing, building and managing our cities… We must build in locations and in ways that reduce climate risks.”

Urbanisation that ignores climate change is further complicated by subsidence, which is caused by the overuse and over-extraction of ground water from land weighed down by urban construction.

Subsidence has become a phenomenon in inland areas as well as coastal regions that are already afflicted by rising sea levels owing to climate change.

With it will come road building, which will mean subsidence and sinkholes particularly during the monsoon. Sentinel-1 SAR Imagery is an excellent tool for tracking the sinking patterns of Indian cities.

In ‘Coastal resilience, (mal)adaptation, and justice in Chennai’ (Journal of Academics Stand Against Poverty) – Ramakrishnan, R. and Kashwan, P share how: “relocation” of population with the ostensible goal of climate adaptation has led to adverse impacts on coastal ecology and local livelihoods. It has significantly undermined the goals of improving coastal resilience and climate justice and constitutes a process of maladaptation, they explain.

Rising levels of the Arabian Sea and Bay of Bengal pose a threat to India’s coastal livelihood, according to the World Metrological Organisation (WMO). Mumbai is one of the few megapolises in the world to have two nuclear facilities within its boundary – renowned author Amitav Ghosh explained in an interview with nuclear safety expert M.V. Raman that the possibility of a Fukushima-like situation developing cannot be ruled out. Are we prepared?

Intensifying frequency and severity not just on the east coast but the west coast (‘benign’ thus far), calls for urgent attention.
Data centres may be fashionable. Not only are they thirsty but have a problem with their waste water. They generate heat and guzzle vast amounts of electricity. They are facing significant push back in North America.

Warns sustainability expert Desiree Lucchese: “Without stronger resilience measures, including land-use reform, government-backed mitigation & adaptation investment, and better data transparency, we risk seeing ‘insurance deserts’ emerge – communities where cover is technically available but economically out of reach.”

Without stricter zoning, better urban design, and resilient building codes, the insurance market will either withdraw or become unaffordable in these high-risk zones – an outcome already visible in certain parts of New South Wales (NSW) and southeast Queensland, explains Desiree.

India expects to be a $30 trillion GDP by 2047. From now to then 90 percent of the infrastructure will be built. Blind sighting climate risk adaptation and resilience could end up as a major drag for insurance of all asset classes.

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