Insured losses from Cyclone Yasi could rise to as much as $1.5 billion according to AIR Worldwide’s initial estimate. Cyclone Yasi struck Queensland, Australia on Wednesday 2nd Feb bringing 300km/h winds and storm surge along the coastline. This loss on top of the expected losses from the flooding suffered in Queensland at the end of 2010 and in January 2011 are beginning to make 2011 look like another year where high levels of insured catastrophe losses are going to be a talking point for re/insurers.
“In the aftermath of the most powerful cyclone to strike Australia’s east coast since 1918, many residents are expressing relief; while the storm was indeed damaging, its impact on heavily populated areas along the country’s northeast coast was less than expected,” said Dr. Vineet Jain, principal engineer, AIR Worldwide. Had Cyclone Yasi made a direct hit on a population centre such as Cairns or even Brisbane the losses would be much, much higher so re/insurers have had a narrow escape from this storm.
AIR put the range of insured losses at somewhere between $354m and $1.5 billion. As we wrote yesterday, Cyclone Larry in 2006 resulted in over $1 billion in economic losses, and according to AIR Worldwide AUD$540m in insured losses, however Yasi was much more powerful so we expect the insured loss to eclipse Larry.
Crop losses from Cyclone Yasi are expected to amount to $800m. Estimates show that as much as 20% of Queensland’s sugar crop could have been destroyed by the storm. Worse hit are the banana plantations in that area which are estimated to have been 80% destroyed and banana prices have now doubled. Combine these crop losses with those caused by the flooding in Queensland and you’re looking at around $1.4 billion in crop losses over the last two months.
With some observers suggesting that the flooding could have caused as much as $20 billion in economic losses, adding on around $5 billion for Yasi and you have a major hit to the state of Queensland’s finances. It will also translate to a major hit to re/insurers once the final insured losses are fully understood.
Reinsurer Munich Re announced its results yesterday and stated that it had experienced approximately $270m in losses from Q4 2010 flooding in Queensland and perhaps as much again from more recent flooding and storms in Q1 2011. A half billion dollar loss is significant at this early stage in the year.