Huge Costs to Insurers & Economy, As Australian Fires Continue to Spread

Insurance companies and other businesses are counting the cost of the Australian bushfires, with thousands of claims already in, and many more expected. It is one of the biggest natural catastrophe incidents to affect Australia in recent years, with an overall economic bill of approximately US$450m so far, as around one third of Australians have been affected in some way.

IAG Australia said Friday that their costs were around $280m so far, with 2800 claims logged since September 2019. Hundreds of houses have been destroyed and sveral people have lost their lives. Livestock has been lost, plus many businesses have seen stock and vehiles destroyed, and trading severely curtailed, sometimes tipping smaller businesses into insolvency.

SGS Economics told the BBC that estimate the ecomonic impact in Sydney alone to be at least $12m per day, due to the disruption to business, people suffering smoke effects, asthma or COPD conditions being aggravated etc. The State of Tasmania estimated the economic impact to be about $25m in 2019, with the bill likely to rise in 2020.

Out of the A$400 million of the claim costs it expects for the six months ended Dec. 31, 2019, overall bushfire events are likely to account for over A$160 million, IAG said. In comparison, the insurer had logged higher net natural peril claim costs of A$414 million in the first half of 2019, a sharp uptick from the year earlier due to higher claims from a hailstorm in Sydney, reported Reuters.

On Thursday, the Insurance Council of Australia (ICA) said that since 8th November some 236 postcodes across four states have been affected, including areas on the east coast and the tuurist-friendly Gold Coast.The impact on the tourism sector is a knock-on consequence of the fires, and could cost Australia millions of dollars in lost revenue this season. Travel insurers may also face more claims, as holidaymakers look to get a refund and book elsewhere.

The ICA said 4,299 claims have been lodged so far, with an estimated 1,485 properties destroyed, but “these numbers are expected to increase”. The fires continue to spread, and insurers must be exasperated that the Australian government seems to lack the water-bearing aircraft necessary, or a strategy to match the leasing of such aircraft during the summer months, in order to fight major fires.

In April 2019, some 23 emergency and fire service professionals wrote to the Australian government expressing concern that leasing seven fixed wing aircraft, from December onwards, capable of carrying large amounts of fire retardant, was inadequate. Nothing was done. It costs about $2.5m per year to lease a large water-tanker aircraft. Given that the bill for this season’s fires could top $500m, an extra three or four aircraft, plus crew wages etc could be a wise investment in future.

INCREASING PREMIUMS LIKELY

According to local travel industry news outlets, some businesses have already been told that insuring against fire is going to get more expensive in future; The operator of the Reef Casino in Cairns said disaster insurance had already become more expensive.

Reef Casino Trust told the media that its insurer has reduced its coverage against cyclones, floods and tidal waves and increased its annual premium by $487,000, to $1.3 million. A recent survey by an Australian consumer commission found that in the Northern Territory some 26 percent of people had no property or contents insurance, due to the high premiums being asked.

 

About alastair walker 4269 Articles
20 years experience as a journalist and magazine editor. I'm your contact for press releases, events, news and commercial opportunities at Insurance-Edge.Net

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