The ongoing outbreak of bushfires in Australia are now said to be the costliest example from an insurance and reinsurance market loss perspective, as the latest data shows losses reached A$1.65 billion (US $1.13bn).
Estimated insurance claims from the bushfire disaster in Australia have kept rising, with claims lodged now reaching more than 20,000 according to the Insurance Council of Australia (ICA).
Insurance and reinsurance broker Aon goes into more detail in its latest catastrophe report, highlighting some 7,000 properties and structures as being destroyed by the fires, with 2,779 of these being homes.
The fires are reported to have caused 31 deaths and have burned an enormous 18.6 million hectares (46 million acres) of land.
81% of current claims come from New South Wales, 8% from South Australia, 8% from Victoria and 3% from Queensland.
Based on inflation adjusted values, Aon believes that this Australian bushfire outbreak from November to the present day is now the costliest bushfire event ever in terms of insurance market losses.
Previously, the Black Saturday bushfires from February 2009 are considered to have been the most costly insurance and reinsurance market bushfire event at around US $1 billion.
As the industry insured loss total continues to rise from these fires it is increasing the chances of reinsurance market impact and perhaps some attrition to certain ILS fund positions on aggregate layers.
Already, Australian primary insurance giant IAG was the first to report that the ongoing bushfires in Australia triggered its aggregate reinsurance protection.
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.
On the retrocession side, it seems unlikely that there will be too much impact, aside perhaps from through some major reinsurers sidecar vehicles or private quota shares, but this is likely to be largely attritional unless the industry loss spikes further.
However, ILS fund manager Twelve Capital revealed 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.
Exacerbating the potential for reinsurance and ILS market losses are losses from the recent severe hail storm event, which is already estimated to have caused a market loss of over A$514 million (around US $355m).
As we explained yesterday, this figure is also expected to rise and could result in further erosion to aggregate reinsurance layers protecting the major Australian insurance carriers.
The combined impacts of these ongoing and recent catastrophes could pressure Australian insurers somewhat and while the overall impact to reinsurance markets won’t be all that significant in terms of dollar value, they could provide further impetus for carriers in the country to better protect themselves and help to sustain rates in the region.