Insured losses from the devastating Eastern Australia floods estimates to AUD 5.8 bn

The Insurance Council of Australia (ICA) has raised its estimate of insured losses from the devastating floods across South-East Queensland and northern New South Wales in 2022 to AUD 5.8 bn. The past estimate from the ICA was $5.1 bn.

The flooding is still the costliest extreme weather event in Australian history and was the second costliest insured event in the world in 2022, according to ICA.

As the costliest extreme weather event in Australian history, last year’s floods created significant challenges for the insurance industry in addressing the extraordinary volume of claims across a very wide geographic area

Andrew Hall, CEO Insurance Council of Australia

Given the scale of the event, the ICA has appointed consultancy and accounting firm Deloitte to undertake an external review into the insurance industry’s response to the flooding in South-East Queensland and Northern New South Wales.

The average claim is $22,000, with personal claims averaging $17,000 and commercial claims averaging $71,000. The number and value of claims is evenly split between New South Wales and Queensland.

Insured losses from the devastating Eastern Australia floods estimates to AUD 5.8 bn

Following three years of La Niña conditions and the COVID-19 pandemic, these floods tested the systems insurers use to respond to customers and raised issues such as a shortage of expert assessors, building labour and materials constraints, and the complexity of recovery and resilience programs delivered by state governments.

The review will look to identify lessons learned from insurers’ response to the floods – both from good practice and practices requiring improvement – to better prepare and inform the industry’s response to future extreme weather events in a changing climate.

Insurers’ response timeframes, resources deployed, claims handling, complaints handling, communication with policyholders, and engagement with stakeholders will all be examined as part of the review.

The review will also examine the impact of regulatory requirements, insurers’ interactions with government agencies and their programs and policies, and broader external pressures including supply chain and labour constraints.

With more than 83% of claims now closed, insurers have agreed it is timely to review the industry’s response to identify best practice and what could be improved when responding to future extreme weather events.

The ICA’s review involved analysis of insurers’ claims and complaints data and include a consultation process with relevant stakeholders, including affected local governments, elected representatives, the Australian Financial Complaints Authority and other regulators, and consumer representatives.

The bodies of the man and his dog were retrieved hours later from a submerged car that had been washed from the road, a police statement said.

Queensland emergency services warned life-threatening flash flooding was occurring in parts of Gold Coast.

This event is the largest flood loss on record for the Australian insurance industry, exceeding the record Brisbane floods of 2011. It was a very complex weather event from a meteorological perspective with changing weather systems during the loss period.

Darryl Pidcock, Head of PERILS Asia-Pacific

The resulting damage from pluvial and river flooding was considerable, especially for South-East Queensland and the northern regions of New South Wales. Given the complexity of the weather systems, the application of event definition clauses for reinsurance purposes will vary across the market.

Such clauses can include meteorological conditions and/or loss aggregation periods, such as the 168-hours clause, which means that there is no common market standard applied to the losses. Given these factors, the losses from this event have been reported by PERILS as one single insurance event.

Yana Keller   by Yana Keller