ICA updates Halloween hail loss to A$1.08bn, highlights inflationary factors

The Insurance Council of Australia has increased its estimate for the insurance and reinsurance market loss resulting from the hailstorm event that struck south-east Queensland on October 31st 2020 to A$1.08 billion.

In total, the Insurance Council has now received some 44,000 claims for storm and hail damage from the 31 October 2020 extreme weather event.

Interestingly and demonstrating the tail of such catastrophe events, claims continued to be filed, with 1,000 claims submitted in the past eight weeks, the ICA said.

The $1.08 billion of claims filed includes: 17,500 private and commercial motor vehicle claims; 20,660 home building claims for damage to roofs, solar panels, guttering, walls, and internal water damage; 4,500 home contents claims; and 1,400 commercial property and crop claims.

88% of the claims filed are now resolved, the ICA said.

The ICA provided some insight into inflationary factors that have slowed down the response to this catastrophe event and likely increased claims, reflecting global trends in how catastrophe loss event tails are lengthening of late.

First, a shortage of builders, roofers and tradespeople available for repair work slowed things down, while shortages of timber, roof tiles and other essential building materials also impacted the response. On top of this, COVID border restrictions impacting the movement of insurance personnel into SE Queensland also affected how claims have been dealt with.

The ICA noted that there are still issues with deploying staff to respond to catastrophes and that should another event occur this would also affect the claims response.

All of which can drive inflated claims and loss amplification as well, ultimately increasing the insurance and reinsurance market loss from any events.

ICA CEO Andrew Hall commented, “Insurers have been working hard to catch up on claims processing and it’s pleasing that we’re now at a closure rate of almost 90 per cent.

“However, the Bureau of Meteorology has said widespread flooding, coastal flooding and erosion, tropical cyclones, and marine heatwaves are all more likely over coming months.

“Families, businesses, and communities rely on insurance disaster responders from interstate or overseas in the aftermath of natural disasters – without them, recovery is delayed with significant personal, social, and economic impacts.

“That’s why the ICA has called on state and federal governments to urgently agree to a nationally consistent approach to the movement of fully vaccinated insurance disaster responders across state borders.”

The hailstorm was originally designated as the first catastrophe to strike Australia of the 2020-21 season by the Insurance Council of Australia (ICA), with an expectation that it could drive a relatively significant loss to insurers and likely erode some reinsurance aggregates.

PERILS had first estimated the potential insurance and reinsurance market industry loss at A$1.231 billion, for the hailstorm event also known as the “South East Queensland Halloween Hailstorms” before then lifting that estimate by 6% to A$1.3 billion.

The hail event occurred after a string of severe thunderstorms developed over South East Queensland during the afternoon of October 31st. The result was large hail as big as 14 cm in diameter in some suburbs.

Severe thunderstorms struck much of South East Queensland that day, including the surrounding areas of Brisbane, the Gold Coast and the Sunshine Coast. But a narrow corridor of storms, from Amberley through to the northern suburbs of Logan near Brisbane, was the area hardest hit by the hail event.

Giant hail was also recorded in the Gympie area, with stones up to 7cm in diameter reported. In addition to hail, damaging winds were also experienced between Redcliffe through to Kingston near Brisbane, with gusts over 110 km/h recorded around Moreton Bay region.

Back in December 2020 we reported that, a number of insurance-linked securities (ILS) funds invested into collateralised reinsurance positions that are exposed to catastrophe events in Australia, reported negative performance for November on the back of reserving for hail storms and severe weather events, which we believed included the impacts of this storm event.

In February 2021 the ICA raised its loss estimate to A$805 million.