Australian insurers faced losses of A$2.19 bn ($1.46 bn) from four events during the 2023-2024 catastrophe season, according to the Insurance Council of Australia report.
The ICA urged the government to increase efforts in mitigating flood risks, which heavily contribute to losses, as claims surged by 73% compared to the previous year. Despite this rise in claims, overall losses from a cyclone and three major storms remained consistent.
Data released by the ICA shows that the impact of extreme weather on the Australian economy has more than tripled over the last three decades.
Insured losses from declared insurance catastrophes have grown from 0.2 of GDP from 1995 to 2000 to 0.7 per cent for the last five years, meaning extreme weather losses are consuming more and more of our economic resources.
In monetary terms, over the last 30 years insurers paid an average of A$2.1 bn per year to customers impacted by extreme weather events, but looking at just the last five years the average annual cost of extreme weather claims has more than doubled to A4.5 bn, driven largely by the growing cost of flood.
And while total premium collected by insurers has grown from A$50 bn in 2012 to A$86 bn in 2023 insurer profits have not kept pace, remaining flat over that period.
In the 2023-2024 season, insurers received 114,804 personal lines claims totaling A$1.79 bn and 1,998 commercial claims amounting to A$392 mn.
The 2022-2023 season also saw A$2.19 bn in losses from five catastrophe events, including three floods, one severe weather event, and a hailstorm.
Although insurance premiums increased last year, industry profits remained flat. Flooding continues to challenge the availability and affordability of insurance for approximately 1.2 mn properties at high risk.
The cost of extreme weather events has increased in real terms for all perils except cyclones. Urbanization and expanding development are driving up disaster-related losses.
Chief Executive Andrew Hall highlighted that the U.S. and Australia face similar issues, with secondary perils exacerbating insurance availability problems in high-risk areas.
This prompted a recent visit by Australian insurers and officials to the U.S. to meet with counterparts in Washington D.C. and California.
The ICA commissioned Deloitte to review the insurance industry’s response to the 2022 South-East Queensland and Northern New South Wales floods.
The industry accepted seven recommendations from Deloitte to improve future responses. A follow-up review is underway to assess the implementation of these recommendations. Meanwhile, other reviews, including one by the House of Representatives Standing Committee on Economics, are pending.
The ICA also praised the New South Wales government for approving a A$5.7 bn, four-year recovery and resilience package, which includes A$525 mn for a fund to reduce residential flood damage in some of the most vulnerable areas.
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