Industry loss from Australia’s January hailstorms escalates to A$1.811bn

The insurance and reinsurance market loss estimate for the severe hailstorms that struck the southeastern region of Australia in January 2020 is now seen as A$1.811 billion by PERILS, as the group adds motor claims to its tally and says the property loss has risen 44%.

Previously, the Zurich based, industry backed estimator of catastrophe insurance and reinsurance market losses had only estimated the property market loss from the hail storms, pegging that at A$670 million back in March.

That compared to an estimate of A$805 million in March and now more recently A$1.6 billion from the Insurance Council of Australia.

So now, PERILS has added motor claims to its loss estimate for this event, which gives a truer picture of the overall insurance and reinsurance industry impact and lifts the total to A$1.811 billion.

Also providing an idea of how the loss from these hail storms has developed further in the last few months, PERILS said this morning that the property insurance market loss from the event is now 44% higher at A$962 million.

As a result, the motor insurance market loss makes up a significant proportion of the total industry impact, at A$849 million or 47% of the total industry loss.

The estimate covers losses suffered from severe hail and convective storms from the 19th to 21st January 2020 and covers storms that struck the Australian states of Victoria, New South Wales, Queensland and the Australian Capital Territory.

PERILS said that the most significant impact from the hailstorms was experienced in Canberra, which saw hailstones falling of up to 6cm in size.

Insurance market losses during the three day event were heaviest in the Australian Capital Territory, which drove 55% of the industry loss, followed by Victoria at 25%, New South Wales at 16%, and Queensland at 4%.

These hailstorms are one of the most costly hailstorm loss events in Australian history and a share of these losses have flowed to some reinsurance carriers and we understand a handful of ILS contracts as well.

The hail storm losses also hit the reinsurance market, with Australian primary insurer IAG announcing that it would claim under its calendar year 2020 main catastrophe reinsurance program that provides it with per-occurrence protection and would cover the recent hailstorm events. IAG said its gross loss impact could even surpass A$250 million.

Insurer Suncorp also stated that an “unprecedented” start to the season for catastrophe losses (including this hail event) meant it expects to make recoveries across its reinsurance program, including its main program, drop-downs and aggregate reinsurance including perhaps its stop-loss.

A number of the largest insurers in Australia also share their losses from catastrophe events, including this severe hail storm, with global players through their quota share reinsurance arrangements.

Darryl Pidcock, Head of PERILS Asia-Pacific, stated, “This release is of particular market relevance as it is the first time hail motor losses, split into private and commercial LOBs, are included in a postcode-level loss footprint by PERILS. This follows the Australian insurance industry’s support for the inclusion of motor, a measure which will further enhance its understanding of underlying risks and enabling improvements in modelling. This is only possible due to that support from our insurance partners and we are grateful to them for providing their data.”