The insurance cost of the recent bushfires in NSW is modest and unlikely to affect insurer ratings, according to Standard & Poor’s.
Although there are concerns that the bushfires occurred so early in the season and were located in populated regions around Sydney, insurance losses arising from bushfire exposure are generally of much lower scale than losses that could arise from natural catastrophes such as cyclones, floods, and earthquakes.
S&P expects that rated insurers IAG and Suncorp’s bushfire losses will remain “well within their budgeted claims allowances for the 2014 financial year", the statement read, however, the extent to which insurers can recover the cost through reinsurance programs is limited because cover generally starts at higher levels.
Therefore, S&P said, the bushfires will add directly to insurers’ claims costs but we expect the amounts will not lower their capital and earnings outside of levels already factored into our ratings. For calendar 2013, there have otherwise been relatively fewer losses from natural catastrophes in Australia and New Zealand compared with recent years, and working losses continue to be managed by good underwriting and pricing.
According to the ICA 1,041 claims have been lodged across the industry as of Oct. 28, 2013, with losses estimated at $145m.
“We expect further claims to be lodged as more property and business owners return to their properties and assess the damage, but we do not expect development in claims costs to be significant,” it added.