The ICA’s second annual Insurance Catastrophe Resilience Report uses insurer data and insights to review the last 12 months of extreme weather events and advocate for changes to reduce the impact of future events.
Disaster & catastrophes
New data shows long-term cost of extreme weather
New data shows long-term cost of extreme weather
News release
Monday, 19 August 2024
New data released by the Insurance Council of Australia (ICA) today 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 $2.1 billion 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 $4.5 billion, driven largely by the growing cost of flood.**
And while total premium collected by insurers has grown from $50 billion in 2012 to $86 billion in 2023 insurer profits have not kept pace, remaining flat over that period.***
The new data analysis is contained in the Insurance Council of Australia’s Insurance Catastrophe Resilience Report 2023-24, released today.
The Report shows that insurers incurred $2.19 billion in claims from declared extreme weather events in 2023-24, the same amount as was incurred from extreme weather events over the previous 12 months.
However, the number of claims from events in the past 12 months was almost 157,000, 66,000 more claims than the previous period, showing that while the average claim from recent weather events was lower the impact was more widespread.
The costliest extreme weather event of the past 12 months was the Christmas storms that impacted the Gold Coast hinterland as well as areas of New South Wales and Victoria, which drove $1.33 billion in claims.
The event with the greatest impact on individual customers was ex-TC Jasper which hit Far North Queensland in mid-December, where the average claim was $36,000, almost three times the average claim for the Christmas storms.
The Report outlines the policy solutions required to improve community and household resilience to extreme weather, which include improved land use planning, stricter building codes, and ongoing investment in resilience measures such as flood levees and home strengthening.
The Insurance Catastrophe Resilience Report 2023-24 will be launched at Parliament House, Canberra tonight.
www.insurancecouncil.com.au/CatastropheReport
Quote attributable to ICA CEO Andrew Hall:
The ICA’s latest Insurance Catastrophe Resilience Report shows the impact of extreme weather on our communities over the past 12 months.
Flood is Australia’s most costly natural peril, and it’s estimated that around 1.2 million properties face some level of flood risk.
Around 230,000 of these have a 1 in 20 chance of a flooding each year, with a further 420,000 properties facing a 1 in 50 or 1 in 100 annual chance of flooding, odds that translate into higher premiums which can lead to a growing protection gap.
In the last few years Australian policymakers have started to think more seriously about this issue, and in many ways we are leading the world in our approach to extreme weather risk mitigation and insurers’ product offerings that respond to these risks.
But we need to redouble our efforts if we are to manage the impact of worsening extreme weather amid a changing climate.
De-risking is the only sustainable way to reduce the pressure on premiums and close the protection gap: improved planning so no more homes are built in harm’s way, stronger buildings that are better able to withstand extreme weather, greater investment in public infrastructure to protect communities, and an ongoing program of home buybacks where no other mitigation is possible.
*ICA Catastrophe Loss data (5-year average) relative to GDP (GDP Index, ABS)
**ICA Catastrophe Loss data, adjusted for CPI
***Estimated from APRA’s published gross earned premium and increased for taxes and charges
April storm causes $176 million in insured damages in NSW
April storm causes $176 million in insured damages in NSW
News release
Friday, 17 May 2024
The Insurance Council of Australia (ICA) data released today shows the April storms that battered NSW caused $176 million in insured damages, with over 95 per cent attributed to property damage.
The storm, which largely impacted the Hawkesbury-Nepean and Illawarra regions, resulted in 14,781 claims, of which 13,959 are for home building and contents. A further 1,737 are related to motor vehicle damage and 822 for commercial property.
The Insurance Council declared the 3-8 April storm (SE 242) a ‘significant event’ to escalate insurers response, start claims data collection, commence analysis and reporting processes with members, as well as coordinate support efforts with government and emergency services. Insurers have been on the ground in impacted communities and have since paid out $10 million to impacted customers.
The storm capped off a busy summer for insurers, with three insurer declared extreme weather events since Christmas, resulting in a staggering $1.6 billion in insured damages across Queensland, New South Wales and Victoria.
- Christmas storms (Cat 233) - $1.24 billion
- Valentine’s Day storms (SE 241) - $196 million
- April storms (SE 242) - $176 million
Budget funding for disaster preparedness welcomed
Budget funding for disaster preparedness welcomed
News release
Tuesday, 14 May 2024
The Insurance Council of Australia (ICA) today welcomed additional funding in the 202-25 Budget to improve Australia’s preparedness to respond to disasters and resilience to natural hazards, including funding to uplift the National Emergency Management Agency’s capacity to support Australians before, during and following disasters, and to the Department of Social Services to support Australians experiencing financial distress in times of crisis and natural disasters.
The ICA looks forward to continuing to work with the Commonwealth to develop positive policies to improve the affordability and availability of insurance as Australians experience cost-of-living pressures.
Continuing to invest in reducing risk to Australian homes and communities, including through the Government’s Disaster Ready Fund (DRF) is vital to taking pressure off insurance costs for households grappling with the cost-of-living.
The ICA looks forward to continuing its work with the Government through the Hazards Insurance Partnership to inform future investments of the DRF, as well as more broadly to develop policies to address land use planning, building codes, risk mitigation programs, skilled labour storages, data investment, cyber security, and tax and regulatory reform.
Insurers will continue to work with the Commonwealth to find ways to complement the DRF, including continuing to encourage Federal and State Governments to establish a permanent voluntary program for buybacks and home-raisings in extreme flood risk areas to move people out of harm’s way before disasters occur, building on the schemes put in place in New South Wales and Queensland in the wake of the record-breaking 2022 floods.
Quotes attributable to ICA CEO Andrew Hall:
Insurance is a critical safeguard to enable Australian families to go about their lives and businesses to operate and grow. We know that Australians are feeling the cost-of-living crunch, including through the impact of higher insurance premiums driven by escalating disasters costs, inflation and global reinsurance premiums.
Reducing physical risks to homes and communities before disasters strike is vital to taking pressure off insurance costs in Australia. That’s why we welcomed the Albanese Government’s announcement of the $1 billion Disaster Ready Fund, which is now in its second year of operation. However, the overall investment in resilience and mitigation remains below where we need to be as a nation.
The budget papers show that the forecast cost to the Commonwealth alone of recovering from the disasters of recent years has increased by almost $4 billion just since December, highlighting why investment in disaster mitigation is more important than ever.
The Insurance industry continues to work constructively with the Government to find ways to put downward pressure on insurance costs and build a more resilient Australia, including continuing to highlight the $6.8 billion stamp duty take on premiums by state governments and the need to return some of that funding to stronger resilience and mitigation measures.
Useful links
Valentine’s Day storms in Victoria declared ‘Significant Event’
Valentine’s Day storms in Victoria declared ‘Significant Event’
News release
Friday, 16 February 2024
The Insurance Council of Australia (ICA) has today declared the Valentine’s Day storms in Victoria a ‘Significant Event’, escalating insurers response for impacted customers.
As of 12pm today, insurers had received 9,947 claims related to the storm, which saw around 530,000 homes left without power across the state.
The Insurance Council’s preliminary extreme weather processes have been activated to assess and monitor the insurance claims impact of the event on 14 February.
Under a significant event declaration:
- The ICA commences its claims data collection, analysis, and reporting processes in consultation with members.
- ICA representatives will continue to work with government and agencies to understand impacts on the community and ensure affected residents receive assistance.
If property or vehicle has been impacted, customers are advised to contact their insurer as soon as possible to commence the claims process, even if they do not know the full extent of damage.
Insurance customers impacted by the power outages may be eligible for financial assistance to cover food spoilage and are encouraged to contact their insurer for more information.
As some people have started the clean-up process, the ICA and insurers are reminding customers that they are not required to keep destroyed property, including carpets and furnishings, and instead take photos, note any identifying information, and keep material samples.
Quote attributable to ICA CEO Andrew Hall:
Insurers have reported a large uptick in claims over the past day, with an increase of more than 3,000 claims in 24 hours – a clear signal that we need to activate services and support for affected homeowners, motorists and businesses and reassure them that their insurer is there to help.
We are hearing from our members that most of the damage to homes and businesses has been as a result of fallen debris from trees and bushland, as well as the extended power outages.
However, it’s too early to understand the full extent of the damage and to estimate the insurance damage bill.
Insurers are also closely monitoring the bushfire situation in Victoria and encourage those impacted to adhere to the advice of emergency services and stay safe.
ICA calls for resilience budget boost to better protect Australians
ICA calls for resilience budget boost to better protect Australians
News release
Wednesday 31 January 2024
The Insurance Council of Australia (ICA) has called on the Albanese Government to ensure the next Federal Budget includes an ongoing fund of $250 million a year to buy back and raise homes exposed to extreme flood risk.
Contained in its Pre-Budget submission, the Insurance Council says the fund should be matched by the states and territories, ensuring that $500 million is available each year to move approximately 750 families out of flood danger zones every year.
The fund would build on the schemes that were put in place in New South Wales and Queensland in the wake of the record-breaking 2022 floods.
Around $1.6 billion in joint funding has been set aside to buy back at-risk properties, with around 1,300 buy backs offered so far.
Funding for any new scheme should exist as an ongoing measure to enable flood-exposed communities to make the decisions locally that address their challenges in timeframes that allow availability of local housing stocks to adjust.
The fund would complement the $200 million a year Commonwealth Disaster Ready Fund – which also requires matched state funding – that invests in projects that improve community resilience.
The Insurance Council’s Pre-Budget submission also calls for $5 million to be provided each year to help improve risk management in sectors experiencing higher frequency of personal injury claims.
The submission includes a range of further measures designed to combat cost-of-living pressures by reducing risk and so reduce pressure on insurance premium prices. These include:
• Incentives for state governments to remove insurance taxes, providing immediate cost-of-living relief
• Extension of the Disaster Ready Fund to a 10-year rolling program, enabling long-term resilience investment with a focus on hard infrastructure projects
• Reforming land use planning and building codes to reduce the risk of extreme weather to Australia’s homes
• Make vehicle repairs cheaper by investing in training for EV mechanics and removing financial barriers for traditional motor trades
Quote attributable to ICA CEO Andrew Hall:
The major flooding events over this summer and back to 2022 have demonstrated the scale of the challenge Australia faces in responding to extreme weather events, and why more investment is urgently needed to better protect Australian lives and properties.
The cost of insurance has seen a significant increase over the past 12 months, driven by the impact of flood events, building and repair cost inflation, and the cost of reinsurance.
While there is no one solution that would immediately work to counter these factors, collectively the measures outlined in our Pre-Budget submission work to relieve upward pressure on premiums by reducing risk, which is the ultimate driver of insurance costs, and so support the community’s need for action on cost of living.
