Cyclone Yasi bore down on the Queensland, Australia coast yesterday and battered the coastal towns of Tully, Mission Beach and Cardwell where hundreds of homes have been destroyed. Cairns and Townsville, the nearest larger population centres, were left largely unscathed thanks to a change in the cyclones track as Yasi made a slight turn before landfall.
Cyclone Yasi struck land as a Category 4 cyclone carrying wind speeds close to 300km/h. A large storm, Yasi’s eye was around 100km wide meaning that hurricane force winds battered a huge area of Queensland. The coastal region around the area of landfall has now received in excess of 8 inches of rainfall in the last 24 hours which won’t help Queensland’s flooding problems.
As Cyclone Yasi approached land, brokers were trading Live Cat industry-loss warranties (ILWs), derivative type reinsurance contracts which provide protection based on the total loss arising from the event (rather than an insurers own losses), according to industry sources. Live Cat trading provides the re/insurance industry with a way to top up coverage at the very last minute as major storms approach land and are becoming more widely utilised.
Insured losses for Cyclone Yasi won’t be known for some time. EQECAT have compared the storm to Cyclone Larry from 2006 which made landfall about 7 miles away as an intense category 3 storm. They expect Cyclone Yasi to impact an area almost double the size that Larry did (due to the extremely large size of Yasi). Larry carried winds of 100 knots, Yasi 130 knots, EQECAT calculate that Yasi would have been carrying 50% more kinetic energy than Larry.
Damages reported from Larry were $1 billion in 2006. Given the size and power of Cyclone Yasi EQECAT are estimating an economic loss of anywhere between $2 billion to $5 billion.
Yasi continues to move inland and is still dropping significant rainfall onto already soaked ground in Queensland. The economic loss suffered by the state of Queensland this year will be heading towards $10 billion after the flooding and this storm. As we wrote yesterday, Queensland is one of the only Australian states which does not reinsure itself in the private market, it’s likely that could change.
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