Insured losses from natural catastrophes in Queensland, Australia look set to jump following the landfall of Cyclone Yasi today on the coast. The storm, one of the strongest ever to approach the coast in that part of Queensland, made landfall carrying winds of up to 300km/h and was forecast to bring inches of rainfall to the already soaked ground in that area. Despite the ferocity of this storm, Yasi is unlikely to cause major losses as it will miss the main urban centres. However the losses incurred this year are mounting.
Queensland is the only major Australian state without a comprehensive reinsurance policy which leaves the state governments assets exposed to disasters. With the flooding of the last two months (our coverage here), and now the losses to come from Cyclone Yasi, it would not be surprising to see Queensland approach the private reinsurance market to provide it with cover in future.
Swiss Re representatives have been quoted as saying that they expect the recent disasters in Australia to raise risk ratings for the country which could make reinsurance premiums more expensive for local insurance companies. Those local insurers will be tapping their reinsurance policies for the flooding and this cyclone so they could find themselves short on cover over the rest of the year.
The knock on effect of this natural catastrophe activity in Australia could be an increased interest in alternative risk transfer and weather risk management techniques. It’s likely that re/insurers will be discussing the potential for insurance-linked securities to provide a mechanism to hedge risks in this part of the world more effectively.