Australian severe storms pegged at initial $105m loss, set to rise

Severe thunderstorms that struck the Victoria and Melbourne region of Australia on December 19th, bringing strong winds, large hail and flash flooding, are estimated to have already resulted in over AU $105 million of claims, a figure that is expected to rise significantly.

The Insurance Council of Australia declared a catastrophe for the severe thunderstorms, which are the first in a number of months to have created a loss large enough for insurance and reinsurance interests to be on watch for it.

More than 25,000 claims had been filed by 11am local time on December 21st, which Insurance Council CEO Rob Whelan said would amount to at least an estimated AU $105 million, which is roughly US $81 million.

Whelan said that more claims would be filed in the coming days, as insurers anticipate householders, motorists and small businesses would file once damage had been assessed.

Whelan said, “A significant number of claims is for hail damage to cars and to roofs, while other damage has been caused by water inundating properties.”

The last catastrophic severe storms in Australia were the New South Wales severe thunderstorms and hail event in February, which caused insurance and reinsurance losses of $512 million from 53,720 claims.

This Victoria severe thunderstorm and hail event may not reach that high, in terms of insured damages, but it does have the potential to rise significantly.

Reinsurance broker Aon Benfield’s Impact Forecasting unit explained the impacts of the severe storm:

An outbreak of severe thunderstorms formed along the cold front of a deep low pressure area, which was centered south of Australia at the time. The frontal system brought significant cooling to southeastern portions of the country, as maximum daily temperatures plunged by more than 10 degrees Celsius between December 19 and 20. As the temperature boundary approached from the west, several thunderstorms flared up and tracked in general southeastern direction. Multiple urban areas across Victoria were impacted, including Melbourne. Large hail, severe gusts and torrential rainfall were reported.

The storms resulted in widespread hail, wind and flash flood damage across Victoria. At the height of the storms, in the evening of December 19, more than 110,000 power outages were reported due to a significant damage to electricity grid. Tens of thousands homes remained without power on the following day. Further damage was incurred on infrastructure. A landslide in Surrey Hills, Melbourne prompted infrastructure damage a road closure.

Impact on property included damaged roofs and flooded basements due to localized flash flooding in urban areas. Notable motor damage was incurred due to golf-ball sized hail. Beside Melbourne, among the worst affected locations were Mildura and Merbein, Bendigo and Kilmore.

In recent years large and damaging hail from severe thunderstorms in Australia has had an increasing impact on reinsurance and also some ILS fund interests. As the insurance-linked securities (ILS) market expands through collateralized reinsurance, fund managers and ultimately investors are gaining greater exposure to these types of events.

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