Growing numbers of Australian households are finding that home insurance is becoming expensive due to rising premiums brought on by climate hazards, which might jeopardize billions of dollars' worth of mortgage loans, according to a report released on Monday.

According to a survey by the Actuaries Institute, 15% of Australian households were facing financial stress related to home insurance as of March 2024. This stress is defined as having premiums that exceed four weeks' worth of income.

This translates to 1.61 million households, a 30% rise over the 1.24 million discovered to be experiencing affordability stress a year earlier. Australia's inflation has been fueled by rising insurance premiums, and there are indications that high building costs and climate-related risks are making it more and more expensive for certain homeowners to insure their homes.

Unfortunately, according to the report's principal author, Sharanjit Paddam, they anticipate this will go on because of the general rise in the risk of natural disasters brought on by climate change, which will keep driving up premiums. According to the research, insurance premiums for 5% of Australian households with home loans were A$5,216 ($3,505) annually, more than twice the average of A$2,124. These households were said to be under significant strain.

As of March, the outstanding mortgage loans for those households experiencing the greatest affordability strain were approximately A$57 billion, or 3% of all home loan assets, according to the report. According to Paddam, if a natural disaster damages their home and they are either underfunded or do not have insurance, they may find themselves in a difficult financial situation. He went on to say that there was a chance that this issue went beyond insurance. Governments, regulators, and lenders were also having issues with it.

According to the report, half of households in southwestern Queensland, the Northern Rivers region of New South Wales, and regional Western Australia faced premiums that exceeded one month's income because of the increased risks of floods and cyclones.