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Australia bushfire insured losses rise 6% to pass A$2bn


The insurance and reinsurance market loss from claims caused by the bushfires that burnt across Australia in late 2019 into early 2020 has risen another 6% and passed A$2 billion for the first time.

Wildfire industry lossesWhile the cost of claims has only risen by 6% since we last reported on the data provided by the Insurance Council of Australia (ICA) back in mid-February, the number of claims filed has risen more quickly by over 16%, suggesting there is further for the market loss from these bushfires to rise.

Costs from the severe bushfires continue to escalate, while this outbreak is now assumed to be the most costly insurance and reinsurance market loss from the Australian bushfire peril ever and one of Australia’s most costly natural catastrophe losses.

Previously, the Black Saturday bushfires from February 2009 were considered to have been the most costly insurance and reinsurance market bushfire event at around US $1 billion.

This most recent Australian bushfire disaster has now driven some A$2.005 billion of claims as of March 18th, according to the ICA, up 6% from the A$1.9 billion reported in mid-Feb.

At the same time the number of claims filed from these bushfires has risen to 27,132 as of March 18th, up 16% from the 23,362 reported in mid-Feb.

With claims still rising faster than payments, it suggests that insured losses have further to run and it could be some more months before the total bill for the industry is understood.

As the industry loss continues to rise from these bushfires, it also increases the chances of reinsurance and retrocession market impact, as well as attrition to certain ILS fund positions on aggregate layers in the market.

Already, Australian primary insurance giant IAG was the first to report that the ongoing bushfires in Australia triggered its aggregate reinsurance protection. The insurer then highlighted significant reinsurance recoveries in recent days.

Suncorp followed up this week, saying that so far claims from the bushfires had not reached its reinsurance arrangements but that its drop-down and aggregate reinsurance could come into play with as little as another A$50 million of claims perhaps tipping the balance. This insurer also highlighted that around half of its aggregate reinsurance had been eroded by catastrophes in the last week.

On the retrocession side, it had seemed unlikely that there would be too much impact, aside from through some major reinsurers sidecar vehicles or private quota shares which was likely to be largely attritional unless the industry loss spiked further.

However, collateralised retrocession manager Markel CATCo did report recently than some of its capital had been trapped due to the bushfires, suggesting the potential for some others to perhaps face similar.

Also, ILS fund manager Twelve Capital said recently that one private ILS contract it had underwritten was exposed to potential losses from the wildfires, suggesting there could be more similar ILS exposure in pockets around the marketplace.

Alongside other catastrophe events, including hail storms this year, as well as severe storms and flooding, Australia’s insurers have faced an expensive few months and their reinsurance carriers are increasingly being called on for support.

PERILS AG recently said that the insurance and reinsurance industry losses from the recent Australian bushfires across an hours clause appropriate seven consecutive day period were estimated to have reached almost A$1.6 billion.

As the losses continue to rise, this reinsurance support may rise with them.

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