Insurance market claims from Australia’s devastating bushfire season have begun to soar as anticipated, with the latest claims figure now pegged at US $300 million (A$431m) by the Insurance Council.
As we explained last week, the devastating bushfire outbreaks have continued to destroy wide swathes of Australia and the toll to properties has been rising.
The current bushfire season is proving to be one of the most damaging and deadly on record, with now millions of acres burnt, a rising number of deaths reported and an expectation that the fires will continue as further dangerous wildfire weather conditions are expected over the coming week.
The fires eased slightly yesterday, with some rain in places, but high temperatures and strong winds are forecast to return later in the week and there are fears that some major bushfires will merge to form even larger and harder to fight blazes.
Hellish scenes continue to be shown in the broader news media which demonstrate the ferocity of the wildfire activity in Australia in recent weeks, which fanned by strong winds, record temperatures over 40C, as well as lightening strikes, has resulted in a growing toll for the insurance and reinsurance industry.
Broker Aon said last week that the industry losses from the bushfires were likely to soar, having pegged them at around US $207 million at the time.
Now, the Insurance Council of Australia (ICA) has confirmed this, saying that claims have leapt to the equivalent of US $300 million, with now over 6000 insurance claims from bushfires across New South Wales, Queensland, South Australia and Victoria since September 5th.
Last week it also came to light that insurer IAG said that ongoing bushfires in Australia had triggered its aggregate reinsurance protection.
IAG said that it is managing claims from three ongoing bushfire events, but explained that its losses from them have been capped by reinsurance recoveries under its aggregate cover, after the full erosion of associated deductibles.
That was the first sign that the fires would result in a reinsurance market hit, albeit not particularly significant at this stage.
But with claims rising rapidly and the situation still meaning many residents cannot even get back to their homes to file claims, the figure is expected to continue soaring.
The still developing nature of the ongoing bushfire situation means further losses are expected.
At this stage, 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, have not been factored in. While residential and other property claims are likely to soar once people can return to badly affected areas of the country.
Insurance and reinsurance markets will hope to gain better clarity over the extent of the bushfire season losses in the coming weeks, but it may take a more persistent change in the weather to allow the fires to be dampened enough for a better picture of the damage to become clear.
At this stage, impacts to the reinsurance market are still expected to be relatively small and also concentrated to a few larger players, particularly with such significant quota shares in place with major insurers in Australia. But if the fires continue to escalate there could be the potential for some retrocession impact, or leakage of these claims through reinsurers quota share arrangements, perhaps even to their sidecars.