Treading Water: What banks are saying about our stormy future

Monday, 25 May 2026

2021 flooding in Westport led to a major investment in flood defences for the town.

With New Zealand experiencing a storm on average every eight days, thousands of properties in coastal inundation and flood zones could become uninsurable. Our new series explores the impacts of relentless weather events on families and communities, asks for how much longer insurance will be available, and how the Government is planning to respond.

ANALYSIS: Big banks have many frightening things to say about storm and flood threat to homes, but you have to dig into their Climate Statements to find it.

ASB’s gives a flavour of just how many homes that have been used for security on its loans are exposed to floods.

It estimates 13% of the residential home loans it had in June were exposed to flooding in a one in 100-year storm like the one that hit Auckland in 2023, and 31% were exposed to flooding in a 1 in 500-year storm like the one which hit Northland in July 2020.

By law, the big banks have to report on their climate risks, and how they see it developing under future climate change scenarios from “orderly transition” to the “hot house world” disaster that would threaten the very future of civilisation in this country.

Kiwibank’s 2025 Climate Statement’s hothouse scenario for 2051 to 2100 reads like a script for a Mad Max-style movie in which land is lost to sea-rise, and New Zealand is cut off from the rest of the world.

The economy has shrunk by 27%, and people grapple with extreme heat and drought, and are unable to repair and rebuild assets as climate damage increases, including from more devastating storms, and insurance becomes non-existent.

“Civil society fragments under the weight of economic hardship, corruption, and government failure. Climate ghettos emerge, disease spreads and infrastructure collapses. Eventually, civil disobedience, black markets and looting begin. People focus on survival. Household income plummets, supply chains are broken, and black markets dominate the economy. Inflation becomes rampant. People struggle to survive.”

Nearer term predictions for banks, and an assessment of current flood threats, are less uncertain.

But even in bank’s less alarming “orderly” climate scenarios, they forecast what ASB calls “increasing prevalence of storm damage”, and some level of insurance retreat, which is the term for insurers refusing to insure homes at higher risk of disasters like flooding.

Banks now check flood risk before lending

Banks are already responding to perceived heightened flood risks.

Every time a bank considers making a loan, it considers flood risk, and the insurability of the home it would take as security.

This analysis, and the data to support it, is improving each year.

In their 2025 Climate Statements, none of the big five banks (ANZ, ASB, BNZ, Kiwibank and Westpac) had data covering flood risk for 100% of the properties they lent on now.

However, all have been investing in the capability, including through deals with insurers, such as Westpac’s deal with insurer Tower. And the Government is working on national flood maps that should be available by the end of the year.

Westpac chief executive Catherine McGrath says the bank has seen the prices of flood-prone homes ‘adjust’.

However, the direction of travel is clear.

Speaking after announcing Westpac’s half-year profit on May 5, the bank’s chief executive Catherine McGrath said the bank now looked at flood risk on every property a prospective borrower sought a loan on.

But, she said: “You have to be quite thoughtful about it because it could be that on a map a house looks like it's subject to flood, [but] if I take some of the ones in Auckland, or in Wellington, actually when those houses are lifted then they're probably going to be fine.”

“Our approach has been to work with customers and understand that particular house,” she said.

“We think it is more of a house by house thing at this point.”

Flood-prone home prices fall

House prices were also adjusting for flood risk.

“If you're in an area where it's quite clear that there are climate risks, the value of that property generally will have adjusted a bit. So, we're not making different decisions based on individual houses at the moment, but we are seeing that there are impacts on the value of the houses depending on where they are,” McGrath said.

Homes which insurers see as more likely to result in large insurance claims cost more to insure, so buyers can’t service as large a mortgage on them. And, according to data from insurer, IAG, the majority of people say they take disaster risk into account when buying homes, which could be affecting prices.

Banks are cagey about whether they would say “no” to lending on homes at heightened risk of flooding.

BNZ chief executive Dan Huggins said after his bank’s half-year announcement on May 4, only a small percentage of properties the bank had as security for loans were “really exposed” to flooding.

BNZ’s Climate Statement estimates the percentage at 2030 as being vulnerable to “severe flooding” of 1.6 metres or more at about 2%, rising to 3% by 2050. But 9% rising to 11% would be vulnerable to moderate flooding by 2030.

That put around 89% of the homes BNZ financed as being not prone to flooding at all.

But would the bank lend on such properties now, if people tried to get home loans from the bank to buy them?

NEWS: Ohura in the Ruapheu District flooded in April due to heavy rain and the nearby river bursting its banks. Fencer Simon McKenzie is photographed scraping up silt after the flood waters subsided.

“It depends,” was Huggins’ answer.

219,000 homes in flood zones

The best national estimate for the number of flood-threatened homes comes from the 2025 Climate Sigma report.

It estimated the number of homes situated in inundation and flood zones in 2023 was 219,000 with a combined value of $180 billion.

As storms and floods are infrequent events, not all will suffer damage-causing flooding.

By 2060, between 2200 and 14,500 would experience at least one “damaging event” by 2060.

Bank Climate Statements show how each bank sees the storm and flooding threat, however, the data they publish only covers homes on which they have mortgages.

Westpac’s 2025 statement says: “Floods are the most frequent and economically damaging natural hazard in Aotearoa. With over a hundred cities and towns located on flood plains, Aotearoa has a long history of living with floods.”

It estimates rainfall flooding would be a threat to about 2% of its residential property lending portfolio by 2030, and coastal inundation would be a threat to around 0.85% more.

The banks are building their capabilities to manage climate risk on their lending portfolios.

But it believes this exposure will worsen, ticking up to as much as 2.35% and 1.12% respectively by 2050.

But this is a threat based on a relatively high level of damage from one in 100 year flooding events, and it is clear from other banks that lending portfolios contain other flood-threatened properties, albeit ones not to exposed to damage.

Banks’ storm worries

Banks’ prime concerns centre on losing money on loans, or insurance payouts falling short after a disaster, but banks also worry about their reputations.

They are aware of how dimly shareholders could view its failure to manage flood risk.

But they are fearful of the court of public opinion, if they withdraw funding from areas, or certain borrowers.

Some, including Wellington academic Jonathan Boston, a leading expert on climate adaptation, have argued society has created the flood-prone home problem, and the costs of it should not be fall entirely on those who have been left holding the buildings.

And lending on flood-prone properties that ended up leaving borrowers in financial trouble could prompt challenges in court that they responsible lending laws.

ANZ reported a damned if we do, damned if we don’t dilemma, in its Climate Statement.

The bank said it could face: “reputation damage, if we take actions to manage our credit risk and/or comply with responsible lending requirements that could be seen as not supporting customers, or if we choose to meet customer demand by continuing to lend in areas expected to be at high risk of becoming unviable during the loan term.”

ANZ said 2.31% of its lending was linked to a security on a property that was considered to be vulnerable to inland flood, coastal flood, or the flip-side of weather disasters, drought. That included 0.55% that was exposed to inland flooding.

However, that only represented homes at a similar level of flooding severity to BNZ’s 2% exposure to homes threatened by severe flooding.

No insurance, no sale

All banks worried about “insurance retreat” making some security properties hard to sell, or at the very least, hard to sell for a decent price.

BNZ spoke of a “risk of losses if BNZ holds security over a significant portion of properties in a higher risk area subject to insurance retreat or increasing insurance premiums”.

It’s not all negative for banks. All reported seeing opportunities to lend money to property owners to mitigate climate risk on their homes, or to finance “managed retreat” as homes are moved out of flood zones.

But they are active in monitoring and adapting their businesses practices to storm and flood risk.

At Kiwibank, the executive risk committee meets at least quarterly, and at each meeting they “assess home lending flood exposures”.