Reinsurance News

Australia flood claims estimated at $254m as crisis extends to Queensland

24th March 2021 - Author: Matt Sheehan

In its latest update, the Insurance Council of Australia (ICA) says it has recorded more than 17,000 claims from the severe flooding that began in New South Wales (NSW) earlier this week, with losses currently estimated at AU $254.2 million (US $193.49 million).

Source: Jason O’Brien/EPA

Notably, 15% of claims are now coming out of Queensland, which has resulted in the ICA extending its catastrophe declaration to the south east of the state.

The ICA further specified that its estimate for the total value of claims received is based on the average cost of claims from previous similar events, and is not based on the value of the actual claims recieved so far.

But at 17,000, the level of claims is already steeply up from the 11,700 reported by the ICA yesterday, suggesting that the flooding will ultimately constitute a major loss event for the re/insurance industry.

IAG, Australia’s largest general insurer, has alone received 5,811 claims so far for damage to homes, properties, and vehicles.

Days of torrential downpours have prompted rivers and dams to overflow around Sydney and in south-east Queensland, leaving 10 million people in flood warning areas and prompting the evacuation of around 18,000 residents.

According to local reports, several hundred homes have been flooded, roads damaged and wildlife lost with telecommunications and power outages across the flooded areas.

ICA claims data shows the areas with the most claims are the NSW mid-north coast towns of Port Macquarie, Kempsey, Laurieton, and Taree, and west of Sydney around Penrith and in the Hawkesbury-Nepean valley.

Losses for individual insurers are expected to vary depending on their exposure to the hardest hit areas, the declared number of events, and the structure of their reinsurance arrangements.

Accordingly, analysts at S&P Global Ratings have told Australia’s P&C re/insurers to prepare for an “influx of claims” related to the floods, but assured that losses will likely be manageable and are unlikely to hurt credit quality.

“The full extent of the damage caused by the floods across large parts of New South Wales, and to a lesser extent Queensland, is yet to be
determined with the rain forecast to continue for several days,” S&P said. “We expect it will take weeks for many claims to be lodged.”

“Nevertheless, we believe that Australia’s P/C insurers are well-placed to assess and meet claims that arise with reinsurance protection shielding the larger insurers from outsized losses. The three largest primary insurers have relatively low retentions, in the A$150 million to A$250 million range, before catastrophe reinsurance kicks in.”

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