Australia bushfire claims hit US $207m, but expected to soar

Update: Claims hit US $300m a few days after this article, read the latest here. Insurance claims from current season bushfires in Australia have now reached US $207 million (according to an Aon source), surpassing US $200 million according to the Insurance Council who now predict that losses will soar.

Wildfire activity in Australia has reached devastating levels in recent weeks, with numerous severe fire weather warnings and hazardous situations developing that have resulted in the loss of hundreds of properties, damage to industries such as agriculture and wine growers and the loss of life.

New South Wales has been particularly badly hit in recent days, with bushfires destroying towns and driving residents and tourists to the beaches.

Hellish scenes in the news media have shown the ferocity of the wildfire activity in Australia in recent days, which fanned by strong winds, record temperatures over 40C, as well as lightening strikes, has resulted in a growing toll for the insurance and perhaps reinsurance industry.

In total, the New South Wales Rural Fire Service has said that in the current wildfire season there have been 1,298 homes destroyed in the state, with another 442 damaged by the fires.

In fact, just in the last few days it is reported that 43 homes were destroyed in blazes in East Gippsland, Victoria, with another 176 destroyed in New South Wales.

85 facilities (so industrial or business premises) have also been destroyed, with another 89 damaged, as well as 2,218 outbuildings destroyed and 937 damaged on farms.

More than 16,000 buildings have been saved from the Australian fires though, showing that the extent of the damage and loss to insurance and reinsurance markets could have been considerably higher without the dedicated work of fire services in the region.

That’s just in New South Wales. Bushfires have been burning more widely in Australia, driving further losses that will hit insurers as claims are tallied.

The Insurance Council of Australia (ICA) said today that insurers have now reported 4,299 claims from the bushfires since November 8th, which currently amount to an industry loss of A$297 million (approx. US $200m) across New South Wales, Queensland, South Australia and Victoria.

The number of claims counted has risen by 429 in just the last day, adding A$59 million of industry losses.

72% of the claims are from New South Wales, the ICA said, with 18% from South Australia and 5% each from Victoria and Queensland.

However, the ICA said that it expects that “claims will soar” once property owners return to their homes and farms.

Given the number of homes reported destroyed in New South Wales, just one of the states affected, it’s clear the toll to insurance and reinsurance markets from the recent bushfire outbreaks in Australia will climb significantly once claims are filed and paid.

The current season has the potential to become the most costly bushfire season for the insurance industry, we’re told by underwriting sources in Australia.

As another data point on these fires, Steve Bowen, Meteorologist & Head of Catastrophe Insight at broker Aon’s Impact Forecasting, said yesterday that insured losses from 2019/20 bushfires in Australia have now reached US $207 million, with more than 1,305 homes and 2,200 other structures destroyed across the country, as well as another 1,500+ damaged.

Aon’s claims count sits at over 4,592 in total for the fire season in Australia.

Again, these figures are expected to rise, perhaps considerably, when the toll from the latest bushfires is better understood.

The still developing nature of the situation means further losses are expected from ongoing bushfires.

There are also the impacts of the fires to tourism, as well as the effects of smoke more widely in the regions affected, which are driving some business interruption claims, to factor in.

Insurance and likely some reinsurance markets will hope to gain better clarity over the extent of the bushfire season losses in the coming weeks.

At this stage, impact to reinsurance market is still expected to be relatively limited and also concentrated to a few larger players, but if the fires continue to escalate there could be the potential for some retrocession impact.

Extreme fire weather conditions continue and a week-long state of emergency has been declared in New South Wales for this week, with high temperatures and strong winds leading to “widespread extreme fire danger” authorities said.

Media in Australia are speculating that insurance claims from bushfires could reach as high as A$600 million. Analysts said that beyond A$500 million some insurers will begin to suffer some pain from the claims burden.