Reinsurance is likely to pick up the majority of cyclone Debbie claims which are thought likely to be around the cyclone Yasi level of AU$1.4 billion after heavy winds and torrential rains devastated the northern Queensland coastline causing the worst floods the region has seen in 50 years.
As those affected assess damage and begin to lodge claims, Insurance Council of Australia (ICA) CEO Rob Whelan said insured losses are mounting to levels “not been seen since ex-TC Oswald in 2014, when storms and flooding affected large parts of Queensland and NSW and caused insurance losses of almost $1.2 billion.”
According to today’s ICA report, 7,500 claims have been lodged by Queenslanders, but these figures are rising; ‘this is only the early stage of a natural disaster and I expect the insurance losses could reach into the hundreds of millions of dollars as householders and businesses return to their properties and lodge claims,” said Whelan.
The Cyclone struck with gusts of up to 260kph, heavy downfall left rivers overflowing across New South Wales and Queensland, engulfing towns as authorities warn of possible fatalities.
Ian Leckie, an emergency services spokesman, told the Telegraph, “This is the fastest event we have seen in this area for a long, long time. The rate of rise has caught people unaware and they are trapped,” and residents reported the worst damage they had experienced so far in the region.
ICA CEO Rob Whelan said response teams were working on claims from businesses in northern New South Wales and south-east Queensland, where severe flooding was being reported, but today the ICA expanded its catastrophe declaration to include northern Queensland as Tropical Cyclone Debbie charts its path further south.
However, with many of the smaller insurers in the region operating with low levels of catastrophe risk retention, it’s likely reinsurers will cover a significant portion of the risk with capital support to help insurers with claims’ payouts as the region recovers from the disaster.
Rating agency S&P called P&C insurers in the region “robust,” benefitting from a large reinsurance buffer to shield reserves from Cyclone Debbie’s impact; the agency is not forecasting any changes to credit ratings for insurers in the region, given their strong capital adequacy and reinsurance cover.
“Rated insurers operating in Australia have low retention of natural catastrophe claims relative to their capital base and high levels of coverage from panels of reinsurers of strong creditworthiness,” S&P commented.
The agency predicts Suncorp Group will pass on much of its claims costs to reinsurers, as with business concentrated in Queensland, it’s expected to be most heavily hit by Cyclone Debbie claims; Insurance Australia Group is less exposed to Cyclone Debbie, but is also expected to transfer costs on to reinsurance.
Smaller insurers operating in the impacted region, Allianz Australia Insurance, Chubb Insurance Australia, and AIG Australia, are similarly protected from the Cyclone’s fallout due to having a small a retention of catastrophe risks and “access to strong parents should they require additional support,” said S&P.
The rating agency suggested reinsurers could be taking up a greater proportion of risks than they covered for cyclone Yasi in 2011, due to higher gross impact; “while the gross claims of the disaster will be material, net claims are likely to be manageable and below Category 5 Cyclone Yasi in 2011, which was estimated to cost about A$1.3 billion.”