The flooding that hit south-east Queensland and the coast of New South Wales earlier this year is the costliest ever, according to new figures from the Insurance Council of Australia (ICA).
The ICA said that the event is now estimated to have cost $3.35bn in insured losses over nearly 200,000 claims. This makes the event the costliest flood in Australia’s history, and the fifth most costly disaster after the Eastern Sydney Hailstorm (1999, $5.57bn), Cyclone Tracey (1974, $5.04bn), Cyclone Dinah (1967, $4.69bn), and the Newcastle Earthquake (1989, $4.24bn).
Andrew Hall, CEO of the ICA, said in a statement: “We knew that this year’s east coast flooding was one of the biggest floods in our history, but these updated numbers show that in monetary terms it was in fact the biggest ever. Only four other disasters have cost more, and this is not a record we want to beat.”
He added: “That’s why it’s imperative that governments at State and Federal level commit to a significant increase in investment in programs to lessen the impact of future events. We also need to plan better so we no longer build homes in harm’s way, make buildings more resilient to the impacts of extreme weather, and remove state insurance taxes which only discourage adequate insurance cover.”
According to the ICA, the rise in claims costs compared to previous floods is being driven by higher costs in the personal property, personal contents, and commercial property classes reflecting the increased cost of materials and a challenging supply chain environment.
86.4% of claims were for property and 13% were for motor. The ICA also said that more than 11% of claims have been closed and $580m has already been paid to policyholders.
The flooding in Australia has made repeated headlines here on Reinsurance News in recent weeks, despite the ICA reporting a slowdown in claims just after the middle of March. This latest announcement from the ICA is slightly lower than that ($3.4bn) put out by PERILS in mid-April. Before that, AM Best announced at the beginning of that month that reinsurers were most likely to bear the brunt of what was then an estimated $2.5bn in losses.
That tallied with an announcement by Fitch that the flooding and severe storms in south-east Queensland and New South Wales will affect insurers’ earnings rather than their capital, due to the strong reinsurance program that firms have in place.
The rating agency said insurers’ robust earnings and capital headroom should ensure their ratings remain resilient to these effects.
However, higher modelled catastrophe losses and rising reinsurance costs in the face of increasingly frequent extreme weather events, coupled with reduced appetite from global reinsurers, pose risks to insurers’ credit profiles over the medium term, it added.
