Sydney, Aug 19: New data from the Insurance Council of Australia (ICA) highlights a dramatic increase in the financial toll of extreme weather events on the Australian economy over the past three decades.
According to the ICA’s latest Insurance Catastrophe Resilience Report 2023-24, the impact of these events has more than tripled, with insured losses now accounting for 0.7 per cent of GDP, up from 0.2 per cent between 1995 and 2000.
In monetary terms, this increase translates to an average annual cost of $2.1 billion over the last 30 years, which has surged to $4.5 billion in the past five years alone.
This sharp rise is largely driven by the growing cost of flood-related claims, which have become more frequent and severe as extreme weather events intensify across the country.
Despite the escalating losses, the report reveals that the total premiums collected by insurers have grown significantly, from $50 billion in 2012 to $86 billion in 2023.
However, insurer profits have not kept pace with this growth, remaining relatively flat over the same period.
This indicates that the rising cost of claims is consuming a larger portion of the industry’s revenue, putting pressure on profitability.
The Insurance Catastrophe Resilience Report 2023-24, released today, provides a comprehensive analysis of the financial impact of extreme weather on the insurance industry and the broader economy. The report shows that insurers incurred $2.19 billion in claims from declared extreme weather events in 2023-24, matching the amount incurred in the previous 12 months.
Interestingly, while the total cost of claims remained steady, the number of claims increased significantly. Over the past 12 months, insurers received nearly 157,000 claims related to extreme weather events, 66,000 more than in the previous period.
This suggests that while individual claims may have been smaller on average, the overall impact of extreme weather was more widespread, affecting a larger number of people and properties.
The costliest event of the past year was the Christmas storms that hit the Gold Coast hinterland and parts of New South Wales and Victoria, resulting in $1.33 billion in claims.
However, the event with the greatest impact on individual customers was ex-Tropical Cyclone Jasper, which struck Far North Queensland in mid-December.
The average claim from this event was $36,000, nearly three times the average claim from the Christmas storms.
The report underscores the growing risk that extreme weather poses to communities across Australia. Flooding, in particular, is identified as the most costly natural peril, with around 1.2 million properties facing some level of flood risk.
Of these, approximately 230,000 properties have a one in 20 chance of flooding each year, while another 420,000 face a one in 50 or one in 100 annual chance of flooding.
These odds not only increase the risk to properties but also drive up insurance premiums, contributing to a growing protection gap.
In response to these challenges, the ICA has outlined a series of policy solutions aimed at improving community and household resilience to extreme weather.
These include better land use planning to prevent new homes from being built in high-risk areas, stricter building codes to ensure structures can withstand extreme weather, and ongoing investment in resilience measures such as flood levees and home strengthening.
The report also calls for greater investment in public infrastructure to protect communities from the impact of extreme weather.
This includes projects like flood levees, which can provide a critical line of defense against rising waters, and programs to strengthen homes against the forces of wind and rain.
Additionally, the ICA advocates for an ongoing program of home buybacks in areas where no other mitigation measures are feasible.
By purchasing and removing homes from high-risk areas, this program aims to reduce the number of properties exposed to extreme weather, thereby lowering the overall risk to communities.
The Insurance Catastrophe Resilience Report 2023-24 will be formally launched at Parliament House in Canberra tonight, where policymakers and industry leaders will discuss the findings and explore potential solutions.
The ICA’s CEO, Andrew Hall, emphasized the need for continued efforts to manage the impact of worsening extreme weather amid a changing climate, noting that de-risking is the only sustainable way to reduce pressure on premiums and close the protection gap.
Media & PR: editor@dailystraits.com. Copyright 2021–Present DailyStraits.com. All rights reserved.