The severe flooding across the Mid North Coast and Hunter regions of New South Wales (NSW) is not expected to derail the strong FY25 outlook, with reinsurers likely to remain disciplined at mid-year renewals, according to analysts at BofA Securities.
On 21st May, 2025, the Insurance Council of Australia (ICA) declared the flooding a Significant Event.
As of today, the ICA reported that insurers have received over 1,600 claims related to the event, with more expected over the weekend.
The worst-affected communities include those along the Mid Coast including Taree, Port Macquarie-Hastings, Kempsey, Nambucca Valley, Bellingen and Coffs Harbour, as well as parts of the Hunter region.
In Taree, flooding at a major river exceeded 6.3 metres (20.6 feet) on 21st May, surpassing a nearly century-old record, according to the BBC.
The NSW State Emergency Service (SES) reported more than 535 flood rescues in the 24 hours to 05:00 local time (19:00 GMT), and over 670 rescues since the flooding began.
The BBC also noted more than 150 flood warnings remain in place, including 40 at emergency level. Thousands of homes and businesses are without power, and more than 100 schools have closed.
“Nearly 10,000 homes are at risk of flooding in the state’s Mid North Coast,” the BBC added.
BofA analysts said the event may partly reverse the “good luck” on weather that insurers (IAG and Suncorp) have enjoyed year to date. Buffers are expected to be eroded by this latest severe weather development.
Nonetheless, BofA believes FY25 remains on track to be a relatively “normal” year in terms of natural peril losses.
Analysts at BofA Securities said, “We have increased confidence in the resilience of Australian personal lines pricing and margins given the active loss backdrop, which serves as a reminder for continued need for underwriting discipline.”
They added, “We expect reinsurance discipline to remain at upcoming mid-year renewals given the frequency and severity of losses, reinforced by climate change concerns. Retention limits are unlikely to change, and we expect aggregate covers will remain difficult to place. This means that primary underwriting discipline is likely to remain as insurers focus on technical profitability and portfolio management. This gives us confidence in the sustainability of underlying margins for both IAG and Suncorp.”
