In conversation with Desiree Lucchese, climate risk expert preventing “insurance deserts”

Desiree Lucchese is founding NED of Impact Alpha Partners (IAP) and is an advisor to the Responsible Investment Association of Australasia (RIAA). She collaborates with the Investor Group on Climate Change (IGCC) and Investors Against Slavery and Trafficking (IAST). Desiree is an Honorary Associate of the Finance Department at UTS Business School and in 2022-23 she was a future skills industry mentor with RMIT Online. Since 2011, she has been an Al Gore Climate Ambassador.

In the course of her consulting career, Desiree has successfully assisted companies and market participants in the collaborative design and delivery of corporate sustainability strategies & governance, stakeholder management, ESG integration and climate risk mitigation, adaptation plans, analytics & reporting.

As Sustainability Solutions Specialist at S&P Global, Desiree helped tailor sustainability solutions for a broad range of clients to better meet their business goals and needs. At MLC Life Insurance she reviewed and elevated the Group’s sustainability strategy and action plans’ initiatives. In fund management, she led a responsible investment strategy, with oversight for the integration of ESG data and climate risk analytics into the investment process alongside active stewardship responsibilities. These included direct engagements with portfolio companies, collaborative engagements with industry peers and advocacy initiatives.

Despite the growing frequency and severity of floods in Australia, why would homeowners be dropping coverage against flood?

Building homes in floodplains is one of the most acute and persistent challenges facing both climate adaptation and the insurance industry. Globally, increased rainfall intensity and sea-level rise are expanding flood-prone zones. In the UK, flooding’s impact stretches far beyond immediate damage to assets with nearly 40% of UK adults affected by flooding in their lifetimes — and one in four properties at risk by 2050.

The Climate Council reports that one in twenty-three of properties across Australia are already at high climate risk. In Australia and across the Pacific, a legacy of poor land-use planning has compounded the risk: many developments continue to be approved in vulnerable areas, driven by housing demand and political pressures at the local level. On the one hand, local and state authorities have not adequately re-zoned local development plans due to either conflicting interests or inertia.

“The pressing needs to house residents is often mismatching the ability of strategic planning to respond and adapt”.

On the other, insurers have been pressed to balance the need to provide coverage with the financial realities of escalating claims. In 2022-23, for example, Australia recorded one of its highest insured losses ever from floods. I do not think home-owners have deliberately dropped cover but they have found themselves at the bitter end of changing insurance dynamics.

Without stricter zoning, better urban design, and resilient building codes, the insurance market will either withdraw or become unaffordable in these high-risk zones — an outcome already visible in certain parts of northern NSW and southeast Queensland. There is also the less discussed challenge of where and how to reconstruct following major disasters: the pressing need to house residents is often mismatching the ability of strategic planning to respond and adapt.

How would you rate exposure to wildfires?

Exposure to wildfires remains extremely high, both globally and regionally. Climate change is intensifying fire weather: hotter, drier conditions and higher wind speeds are leading to longer fire seasons and more severe fire behaviour across temperate regions. Australia’s Black Summer fires of 2019-20 were a stark illustration, resulting in $2.4 billion in insurance claims and broader economic impacts many multiples higher.

Similar trends are evident in the western United States, Canada, southern Europe, and even previously less fire-prone areas. In the Pacific islands, while the risk of large-scale wildfires is generally lower, shifts in vegetation and land-use practices are increasing local exposure. Australian insurers now view wildfire risk as a “chronic” rather than “episodic” threat, and reinsurance pricing is starting to reflect this permanency.

“The scale of risk now demands much greater investments and strategic planning”

Investment in fuel management, early warning systems, and community resilience is critical, but uneven across jurisdictions. Planned burning in collaborations with Traditional Custodians—a land management practice where controlled fire is used, under carefully monitored conditions, to reduce fuels such as grass, leaves, bark, shrubs and fallen branches — has demonstrated over and over again the value of fire risk preparedness. The scale of risk now demands much greater investments and strategic planning.

Do you see the risk of homes getting unaffordable and uninsurable—as in parts of the US?

Yes, this is a very real and growing risk. In parts of California, insurers have either dramatically raised premiums or exited markets altogether due to unsustainable wildfire risk. Australia is seeing similar dynamics emerge in high-risk flood and fire areas. In northern Queensland, for instance, cyclone and flood risk has already led to extremely high insurance premiums, prompting government intervention via reinsurance pools.

Without stronger resilience measures, including land-use reform, government-backed mitigation & adaptation investment, and better data transparency, we risk seeing “insurance deserts” emerge—communities where cover is technically available but economically out of reach. This not only affects household budgets but also impacts property values, local economies, and social cohesion. The Pacific islands face an even sharper threat, as insurance penetration is lower to begin with, and sovereign risk pools like the Pacific Catastrophe Risk Insurance Company (PCRIC) are increasingly vital.

Are insurers leveraging their investments to correct any adverse trends in your market?

Yes, leading insurers are increasingly recognizing that their investment portfolios are powerful levers for systemic change. Through responsible investment strategies—such as ESG screening, thematic investing, and active stewardship—insurers can push for better climate resilience and sustainability outcomes. For example, major Australian insurers have joined alliances like the UN-convened Net-Zero Asset Owner Alliance, committing to align portfolios with the 1.5°C target.

“The most sophisticated players are using scenario analysis and climate stress testing to ensure their portfolios are future-proof”

In the Pacific, investment options are more limited, but there are efforts to channel capital into resilient infrastructure and renewable energy. Still, the scale of investment needed significantly dwarfs current flows. Climate megatrends — like deglobalization, demographic shifts, and technological disruption—are also influencing how insurers assess and price long-term risks.

The most sophisticated players are using scenario analysis and climate stress testing to ensure their portfolios are future-proof, although industry-wide consistency remains a work in progress. Other insurers drive risk-adjusted returns from the relative infrequency of predicting major loss events and therefore invest in alternative assets such as natural catastrophe reinsurance or Insurance Linked Securities (ILS). Whilst acknowledging its potential for driving some returns, these are in my view a form of ‘disaster capitalism’ and I think we have better ways to create positive futures.

How would you rate the Australian market’s investments in community and business resilience?

Some progress has been made, but not nearly at the scale or pace required. Climate risks and their impacts are a complex interaction of exposure, sensitivity, and adaptive capacity. These, in turn, determine the degree of vulnerability. Vulnerability is multi-faceted and needs to account not only for individual asset vulnerability but also for socio-economic factors and ecological vulnerabilities, the susceptibility of ecosystems to damage. The Australian federal and state governments have started shifting from a reactive to a proactive disaster management approach, notably through initiatives like the Disaster Ready Fund, which aims to invest AU$1 billion over five years in resilience projects.

“Resilience funding still represents a small fraction of disaster recovery spending”

Insurers themselves are also investing in community education, retrofitting programs, and risk research. However, resilience funding still represents a small fraction of disaster recovery spending — estimates suggest less than 3% of disaster-related expenditure in Australia goes toward pre-event mitigation. In the Pacific, challenges are even more pronounced, as many island nations face existential climate threats but have limited fiscal capacity for large-scale resilience investment. Effective public-private partnerships, improved building standards, and new insurance mechanisms will be crucial to closing the protection gap.

Recent elections — the Coalition aimed on winding back the 2030 target if elected. Did it weaken the bipartisan commitment to net zero by 2050?

Yes, weakening interim targets would pose significant risks. The 2030 targets are critical “stepping stones” to achieving net zero by 2050 — without ambitious short-term action, long-term goals become unattainable. From a global perspective, Australia’s credibility is already under scrutiny given its per capita emissions profile and reliance on fossil fuels. A rollback would damage international relationships (particularly with key trading partners like the EU and Japan), slow clean investment inflows, and expose Australian businesses to carbon tariffs.

For insurers, the implications are direct: slower emissions reduction means greater physical risk (more severe weather), transition risk (abrupt policy shifts later on), and liability risk (climate litigation). In the Pacific, where countries are already experiencing devastating climate impacts, any perceived retreat by Australia could also strain regional partnerships and undermine joint resilience efforts.

This article is also published on The Diversity Blog. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.