On 24 March 2026, the Australian Prudential Regulation Authority (APRA) released its Insurance Climate Vulnerability Assessment (Insurance CVA).

The Insurance CVA is a prudential stress test that explores how a changing climate could affect home insurance affordability and the insurance protection gap over the coming decades.

During the Insurance CVA APRA examined how home insurance coverage may fall under two severe, but plausible global climate-related scenarios projected out to 2050: one with higher physical risks from weather-related events and one with greater economic impacts from transitioning to a lower emissions economy.

It found that, under both scenarios, climate-driven pressures on insurance premiums could significantly widen Australia’s insurance protection gap, thereby increasing financial risks to the system. APRA estimates that around one in seven Australian houses are uninsured today. Under both stress scenarios this could rise to around one in four by 2050 – equivalent to an additional one million homes without adequate home insurance.

The scenarios used in the Insurance CVA stress test assume no further policy intervention or physical home adaptation measures are implemented over the period, an approach in line with standard stress-testing practice. However, APRA notes that in practice there are several levers available to reduce the risks faced by homeowners, and thereby moderate subsequent impacts to the financial system. APRA discusses these levers under three headings:

  • Reducing weather peril risks. The protection gap can be alleviated by implementing resilience measures that reduce weather peril risks, via community-level and/or household-level adaptation. Adapting to increasing weather risks may involve building or upgrading protective infrastructure that safeguards exposed communities. Examples of these interventions include flood levees, fire breaks or enhanced stormwater drainage systems. As Australia’s housing stock expands, governments and industry have the opportunity to leverage planning and regulatory tools to incentivise building homes in lower‑risk locations, thereby supporting long‑term insurability. Furthermore, financial entities could consider how they can work together with their customers to best support the national emissions targets (both in the shorter and longer term) set out by Australia’s Nationally Determined Contributions under the Paris Agreement.
  • Improving insurance affordability. Alongside risk reduction, there are a range of actions that may support the affordability of home insurance and narrow the protection gap. This includes innovation in insurance products, and where necessary, public policy interventions, which can help reduce the price of insurance.
  • Managing risks to the financial system. A growing protection gap can amplify risks for the financial system, such as credit risk in banking mortgage portfolios and for insurers the risks that may follow from failing to meet societal expectations. The development of a centralised insurance register that identifies the insurance status of properties could provide greater visibility of the potential credit risk from uninsured mortgages throughout the life of a loan. Developing such a register would likely require collaboration between the insurance and banking industries, and government. To maintain their ability to meet societal expectations, insurers should continue to proactively contribute to the whole-of-system efforts in risk reduction. This can include supporting customer outcomes by transparently communicating the drivers of increasing premiums and increasing customer awareness of the options available to help reduce the premium increases.