Some policyholders are reporting insurance premium increases of almost 50% after a long summer of bushfires, storms, and floods; but the Insurance Council and analysts are playing down the prospect of widespread large premium increases.
Six catastrophic events have been declared in Australia over the past five months, including the unprecedented bushfire crisis that started in September, with insurance claims expected to total more than $2.5 billion.
“This is known as disaster season for a very good reason and this certainly has been one of those angry summers that Australia experiences,” ICA’s Campbell Fuller said, adding that it was too early to say if insurance premiums would be impacted by the summer catastrophes and that it was “unlikely these… will have a significant effect on premiums,” ABC reported.
Fuller said insurers has already taken into account the impending natural catastrophe costs last year – a sentiment shared by JP Morgan insurance analyst Siddharth Parameswaran.
“There were plenty of signs in early 2019 that we were heading into a catastrophic bushfire season and the insurers made the relevant prudential precautions for that, including reinsurance and their own balance sheet measures,” Fuller told ABC.
“The industry had already allowed for a huge increase in their natural perils budgets leading into this,” Parameswaran said. “I think there will be some [premium] increases in particular parts of Australia, but we’re not expecting large, across-the-board increases like we saw in 2011 [after Cyclone Yasi].”
The JP Morgan analyst warned though that the natural disaster season was not over.
“There’s no doubt this year is materially above average in terms of what we would have expected and we’re still not through the worst of it, so there are still some pressures to come,” Paramewaran told ABC, as he estimated about $2 billion insurance losses from the bushfires, plus almost $1 billion for wet weather events such as hail, cyclones, and floods.