Natural catastrophe and severe weather events during the summer months in Australia have now caused over AUD $550 million (USD $415m) of insurance and perhaps reinsurance industry losses, according to the Insurance Council of Australia.
The four events, the Pinery bushfires in South Australia (November 26), the Sydney tornado (December 17), the Great Ocean Road (or Separation Creek) bushfires in Victoria (December 26) and the bushfires in Western Australia’s south west Yarloop area (January 8), were previously pegged at an industry loss of AUD $515 million, but the claims continue to come in resulting in a rising toll for insurance and reinsurance firms.
The ICA has broken down the industry losses by event now, with the Sydney tornado set to cause insurance and reinsurance firms the greatest loss, at AUD $206 million. The Pinery bushfire is next at AUD $172 million, the Great Ocean Road bushfires at AUD $110 million and the Yarloop fires at AUD $71 million.
The figure for summer catastrophe losses is actually fairly low, in terms of averages, due to the fact that Australia did not see any major cyclone impacts. However these losses are just the major catastrophe level events and there have been many other flooding and storm events which will have increased the aggregate exposure of insurers during the summer months.
LS funds were hit by this spate of losses in Australia, with the bushfires resulting in some exposure, through private ILS contracts and one ILS fund reporting negative performance in November 2015 due to exposure to an Australian aggregate reinsurance cover.
As ILS funds continue to grow their reach and penetrate increasingly deeply into reinsurance markets in regions such as Australia, the exposure to an aggregation of attritional catastrophe or weather events is growing.
This makes the ability to handle, manage and pay claims increasingly important for ILS managers involved in collateralized reinsurance contracts, as the number of events which result in the need to reserve of side-pocket continues to increase.
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