ICA report highlights potential A$4bn annual savings from strengthened construction codes

Strengthening Australia’s National Construction Code (NCC) could reduce costs from extreme weather events by as much A$4bn ($2.53bn) a year, according to a report commissioned by the Insurance Council of Australia (ICA).

The study by the Centre for International Economics (CIE) found that extreme weather costs are likely to increase significantly in the near future – with research from the McKell Institute suggesting costs could reach A$35bn by 2050.

But the CIE said strengthening the NCC – which addresses risks associated with extreme wind including cyclones, along with floods and bushfires – could create significant cost savings.

ICA CEO Andrew Hall commented: “Minimum building standards in Australia are designed to preserve life in a catastrophic event – but they are not designed with the goal of preserving the property itself.”

The report said the benefits of improving building resilience were often ignored as costs from displacement are difficult to measure.

But it highlighted that a number of cost-effective measures can be undertaken, including changes to the NCC, that would improve resilience and save costs.

The number of dwellings exposed to cyclonic wind is estimated to be 530,000, driving estimated annual costs to residential buildings of A$2bn per year.

With the expected impacts of climate change and future housing development in the affected areas, the CIE estimates costs could increase to A$4.4bn per year by 2050 and A$27.5bn per year by 2100.

NCC limitations that need addressing include the prevention of water ingress damage – a key driver of insurance claims – and buildings in Wind Region B not being designed to deal with high internal pressure.

Flooding and bushfires

Flooding is responsible for the second-highest annual costs, estimated at ~A$1.5bn from Class 1a buildings.

More than 913,000 Class 1a dwellings were subject to flood risk in 2022, of which 836,000 were occupied.

The effects of climate change and future development in flood-prone areas could see total costs rise to A$2.3bn annually by 2050.

The CIE said current building standards and codes were not achieving the desired flood mitigation outcomes, while increasing flood risk is resulting in events that surpass current defined standards. It added that the ABCB Standard on Construction of Buildings in Flood Hazard Areas does not consider flood resilience.

Bushfires were the final peril that could see cost savings through a strengthened NCC.

Around 1.4 million Class 1a dwellings are in bushfire-prone areas – some 15 percent of total Class 1a stock – with the CIE estimating annual costs to residential buildings at A$487mn.

Insured losses from bushfires have increased from around A$5mn per year in the 1990s to an average of A$390mn per year in the last 10 years.

Current standards fail to address certain factors driving property losses, while multiple fire risk mitigation measures are not within the NCC’s scope.

The CIE recommended there should be an assessment of how approaches could be integrated into NCC regulation, including whether these approaches could be an effective alternative to building strengthening measures.