Southeastern Australia floods insurance loss estimates to AUD 840mn - PERILS

The catastrophe insurance data provider PERILS has disclosed its second insurance industry loss estimate for the Southeastern Australia floods, amounting to AUD 840 mn.

According to PERILS, the estimate includes losses from the property and motor hull lines of business and is based on loss data collected from the majority of the Australian insurance market.

The meteorological lows alongside moist tropical air from warm surface water in the Pacific Ocean led to storms and extensive rainfall in much of Southeast Australia.

This triggered widespread riverine and pluvial flooding in the Murray-Darling basin of New South Wales and Victoria, and later in Tasmania.

The floodwaters mainly affected rural areas and caused considerable damage to homes, businesses, infrastructure and agriculture.

Southeastern Australia floods insurance loss estimates to AUD 840mn - PERILS

The weather in Australia in 2022 was dominated by La Niña conditions which resulted in above-average rainfall in many regions of northern and eastern Australia.

Both the record floods of late February/March and the floods of October 2022 are linked to this large-scale weather pattern, which is now in its third consecutive summer but anticipated to weaken in the coming months.

While the February-March floods impacted densely populated coastal regions, the October floods mostly affected inland rural areas and losses to the insurance industry were therefore significantly lower.

For the affected communities they were still a heavy blow. We, therefore, hope that our work of systematic exposure and loss data collection can contribute to a better understanding of flood vulnerabilities also in such rural communities, and over time help to mitigate the impact of future events.

The Insurance Council of Australia (ICA) said insurers have to date received 86,703 claims related to the South-East Queensland and New South Wales floods. 

This is a 28% increase on claims count, driven by a 49% increase in the number of claims from New South Wales as policyholders return to their properties in that State. 72% of claims are from Queensland and 28% are from New South Wales. Across both States 83% of claims are for domestic property, with the remainder motor vehicle.

Southeastern Australia floods insurance loss estimates to AUD 840mn - PERILS

AUD 840 mn loss – the second estimate follows an initial loss estimate of AUD 790 mn, which was issued by PERILS on December 2022, marking an AUD 49 mn increase since then.

With overall losses of around US$ 270bn and insured losses of roughly US$ 120bn, 2022 joins the recent run of years with high losses. Overall losses were close to the average for the last five years, while insured losses were significantly above average.

The continued high level of insured losses is impacting insurers at a time when they are having to deal with both high inflation rates and a shrinking capital base due to rising interest rates. In contrast, the positive effect on investments from higher interest rates will only come in time.

The 2022 south eastern Australia floods are a series of floods occurring in Victoria, Tasmania, New South Wales and South Australia which began in October 2022.

Some towns experienced the highest river peaks in decades, and many places saw rivers peak multiple times. Torrential rain is responsible for the floods.

In Victoria, the Campaspe River, Maribyrnong River, Avoca River, Goulburn River, Loddon River and Broken River all flooded their banks. In New South Wales, the Lachlan River caused major flooding in Forbes and the Murrumbidgee River at Wagga Wagga caused problems. In Tasmania, the Mersey River, Meander River and Macquarie River saw water levels reach major flood levels. All of these Victorian and NSW rivers except for the Maribyrnong River flow into the Murray River, causing flooding downstream in South Australia in November and December.

The floods were expected to reduce Australia’s economic growth and increase inflation. According to the Insurance Council of Australia, the floods are the nation’s most costliest natural disaster.

Nataly Kramer   by Nataly Kramer