Aon reveals impact of the Australia fires on reinsurance

Aon reveals impact of the Australia fires on reinsurance | Insurance Business

Aon reveals impact of the Australia fires on reinsurance

The ongoing Australia bushfires have burned across an extremely large area, but their reinsurance impact will likely not be as significant as some previous fires, according to global brokerage Aon.

Although an extreme 10 million-plus hectares (100,000km2) have been burnt throughout the 2019-20 bushfire season to date, the impact on the built environment has been significantly less than what might have been expected. This is because the fires burned through large remote areas, with the majority of impacted towns having populations less than 10,000, the Aon analysis found.

“When we examine the total number of structures inside the current burnt extent from this fire season (therefore defined as being ‘exposed’), we find there is approximately 4.5 km2 of burnt area for every single exposed property,” Aon said. “When we examine other significant fire seasons in Australia (Victoria in 2009, ACT in 2003, NSW in 2013), we find there is more than one exposed property every 1km2.”

The most expensive bushfire seasons in Australia in terms of insured loss ($1.76b in 1983 including Ash Wednesday (VIC), $2.16b in 1967 including Black Tuesday (TAS), and $1.76b in 2009 including Black Saturday (VIC).

“These bushfires are significant in terms of duration and geographic breadth of burnt area,” Aon said. “Definitions applied to bushfire events in reinsurance contracts limit recoverable damage either by time (i.e. a maximum duration) or geographical extent (i.e. distance or territorial boundary). The nature of the current losses from the bushfires means there is the possibility that reinsurance impact will not be as significant as some previous events.” 

According to the Insurance Council of Australia (ICA), 13,750 bushfire insurance claims have been lodged since Nov. 08, with losses estimated at $1.34 billion. The numbers are expected to increase as access to fire damaged regions opens and damage assessments continue.