Measuring the Impact of Insurance on Recovery after Extreme Weather Events Using Nightlights

Climate change is predicted to make extreme weather events worse and more frequent in many places around the world. In New Zealand, the Earthquake Commission (EQC) was created to provide insurance for earthquakes. In some circumstances, however, homeowners affected by extreme weather events can also make claims to the EQC – for landslip, storm or flood events. In this paper, we explore the impact of this public natural hazard insurance on recovery from weather-related events. We do this by using a proxy for short-term economic recovery: satellite imagery of average monthly night-time radiance. Linking these night-time light data to precipitation data records, we compare areas which experienced damage from extreme rainfall episodes to those that suffered no damage even though they experienced extreme rainfall. Using data from three recent intense storms, we find that areas that experienced property damage, and were paid in a timely manner by EQC, did not fare any worse than areas that suffered no property damage but were exposed to these extreme precipitation events. This finding suggests that EQC insurance is serving its stated purpose by protecting claimants from the adverse impact of extreme weather events.