Some 88,500 claims amounting to AUD$845 million have now been lodged following the large hailstorm that struck Brisbane, Australia in late November 2014, according to reports from insurers, increasing the chance that some ILS funds get hit.
The reported insured losses figure is an increase of AUD$41 million on previous estimates, and experts believe the total will rise further still, as claims continue to mount and are filed.
Shortly after the ‘freak storm’ struck the Brisbane area Artemis reported that there was potential for claims to reach the AUD$1 billion mark, and as the claim tally continues to rise it appears there’s a good chance they will.
The latest estimate surrounding the event purely covers damages to property insured via private insurance companies, excluding the impact to Government and council buildings, and those absent insurance protection.
A significant amount of claims filed relate to damages for motor vehicles, the Insurance Council of Australia (ICA) has advised that roughly 60,000 insurance claims under the ICA have been for automobiles, up from the 51, 472 filed in December as reported by Artemis.
The impact on the wider insurance and reinsurance market that a storm of this magnitude can cause was discussed in an article by Artemis during the first week of January, when we looked at November’s poor catastrophe bond, reinsurance linked investment and insurance-linked securities (ILS) fund average return.
Protections against Australian perils are an increasing aspect of the ILS market. Despite a general expectation that insured losses for the weather event shouldn’t be particularly notable for ILS players, some fund managers did put capital aside to protect against any potential loss, which in turn could have had a slight impact on ILS funds private deal valuations.
So now it remains to be seen how many local insurers will require help from their reinsurance programs, with several expecting claims to reach their maximum financial impact level.
As claims continue to flood in it seems certain that the reinsurance industry will be accountable for at least a portion of the costs from the severe Brisbane hail and thunderstorm.
Karl Sullivan, General Risk Manager at the ICA has advised that the majority of the rebuilding is likely to be completed by March/April 2015, adding; “It does take some time but it’s going probably a little bit faster than we predicted it to.”
If ILS fund managers do see an impact it will only be slight, we would imagine. But the fact that some have already set aside reserves suggests that they see a good chance that losses will reach the attachment levels for the layers they are providing collateral for.
This is another good example of ILS fund managers actively protecting their investors, by reserving capital against any reinsurance assets in their portfolios which may be at risk.