Rising Climate Risks Leave 1.6M Australian Households In Financial Strain, Report Reveals

At least 1.6 million Australian households are facing financial strain and are left with outstanding costs equivalent to four weeks' income due to rising climate risks, a new report from the Actuaries Institute has revealed.

According to the report, areas most prone to climate-related disasters, such as cyclones and floods, are experiencing a 30% surge in premiums.

The research projects that 5% of Australian households with home loans are experiencing severe financial strain and that yearly insurance premiums average AU$5,216, which is more than twice the AU$2,124 national average.

As of March, these households -- which are under the most stress over affordability -- held AU$57 billion in outstanding mortgage loans or 3% of all home loan assets. The report also revealed that there was a 9% increase in median insurance premiums in just over 12 months, The Guardian reported.

Households in high-risk areas, such as Southern Queensland and New South Wales' Northern Rivers, are paying more than double the average premium, facing immense financial strain that may likely impact mortgage loans and the housing market, Reuters reported.

Costs of rebuilding, repairs, and reinsurance are hiking insurance premiums, leading to households becoming underinsured or uninsured, which means natural disasters can take a greater toll on them.

The report's lead author, Sharanjit Paddam, said, while speaking about people struggling to pay the insurance amount, "This is because increases in premiums are outpacing wages growth. Unfortunately, we expect this will continue because of the overall increasing risk of natural disasters associated with climate change, which will continue to put upward pressure on premiums."

In the wake of mounting concerns, the Actuaries Institute recommends "climate adaptation bonds" as a means of strengthening resilience to disasters, but Senator Mehreen Faruqi of the Green Party believes that fossil fuel companies should foot the bill to expedite the shift to sustainable energy.

"The first step to tackling skyrocketing insurance premiums is to stop fuelling the fire," Faruqi said.