Can flood mitigation projects impact insurance premiums?

On May 1, the New South Wales State Emergency Service (NSW SES) issued an evacuation warning to those residing in Ocean Shores, Golden Beach, New Brighton and Billinudgel.

The notice was posted in the aftermath of severe rainfall that hit NSW during the tail end of April. On April 29, the NSW SES applied a flood watch to NSW's coastal valleys and areas around the Queensland border.

Situations such as these may give business owners cause for concern, and for good reason. Flood insurance may cover a company's contents, but this isn't always a given. Furthermore, premiums for this type of cover are often calculated by deducing the risk of a property sustaining flood damage.

Can infrastructure investment lower premiums?

Insurance providers typically deduce flood risk levels by assessing a business's property and where it's located. For example, if a company is positioned in a city with flood mitigation dams, channel levees and retarding basins, an insurer may reduce the structure's risk rating, other deciding factors aside.

In 2013, former Australian Prime Minister Julia Gillard held a press conference in Ipswich, a town west of Brisbane, to discuss $100 million in flood-mitigation funding, according to ABC. The news source noted that the federal government had dedicated $50 million to increase the height of the Warragamba Dam in Sydney.

Former Financial Services Minister Bill Shorten also spoke at the press conference. He told reporters, including those at ABC, that the investment could positively impact insurance rates.

"The government is moving on mitigation with the promise from the insurance industry that when governments at all levels fund mitigation, we expect insurance policies for householders to go down," said Mr Shorten, as quoted by the source.

What about businesses?

Mr Shorten's comment applies to homeowners, so business owners residing in the same areas may be wondering if their premiums could decrease. To answer these questions, such parties should speak with their insurance providers to learn more.