Extreme heat kills more Australians than any other natural hazard, yet it sits almost entirely outside the general insurance loss pool – a gap drawing sharper attention as a heat event grips the eastern US, new survey data shows a preparation shortfall at home, and a mandatory climate-disclosure regime forces insurers to account for physical risk in their financial reporting.
Heat’s position in the risk landscape is unusual. Severe and extreme heatwaves have claimed more lives than any other natural hazard in Australia, according to the Australian Climate Service, which also records that extreme heat produces more deaths and hospital admissions each year than any other hazard. Coronial research covering July 2000 to June 2018 identified at least 354 heatwave deaths, with about half in Victoria and a quarter in South Australia, per Risk Frontiers. The Australian Climate Service estimates labour-productivity losses alone at $8.7 billion a year.
Little of that flows through insurers as property claims – the channel through which most weather perils become insured losses. The point is visible in the data the industry itself benchmarks against. The Munich Re NatCatSERVICE database, used in the Insurance Council of Australia’s (ICA) 2024-25 Catastrophe Resilience Report to rank per-capita losses, excludes heatwaves and droughts altogether. On that measure, the ICA reported that Australia ranked on average at least second among comparable developed nations for economic and insured losses per capita from extreme weather between 1980 and 2020, behind the US. The country’s deadliest hazard does not enter the calculation.
The declared-event record reflects the same pattern. The ICA reported $1.97 billion in insured losses across 154,100 claims for the 12 months to June 30, 2025 – one cyclone and two floods – down 25% from $2.61 billion the prior year, and put the current annual cost of extreme weather at around $4.5 billion. No heat event appears among the declared catastrophes. The hazard with the highest human toll leaves the smallest direct claims footprint, reaching insurers instead through business interruption, energy and infrastructure failure, and demand surge.
That indirect channel is measurable. The Australian Energy Market Operator’s Quarterly Energy Dynamics report for the first quarter of 2026 recorded a new National Electricity Market (NEM) underlying-demand record of 25,496 megawatts, driven by January cooling load, and documented a single South Australian evening in which spot prices reached $19,000 per megawatt-hour across 28 dispatch intervals as Adelaide temperatures passed 43 degrees Celsius and interconnectors were constrained. Grid stress, price volatility, and outage exposure of that kind sit behind business-interruption and contingent claims rather than in the catastrophe tally.
The overseas conditions supplied the immediate prompt. A record heat dome over the eastern half of the US was tied to at least 25 deaths and pushed readings past 100 degrees Fahrenheit (38 degrees Celsius) in more than 20 states, The Business Standard reported, with active heat alerts covering more than 140 million people as of July 5. New Jersey linked 22 deaths across 10 counties to the temperatures, and authorities described conditions as “life-threatening.”
Domestic readiness lags exposure. Research within IAG’s Resilient Futures Report found that while 38% of Australians have experienced heatwave impacts in recent years, only 23% have added cooling or shading to cope. The distance was widest for Gen Z, at 42% impacted against 21% who had acted, while Baby Boomers were most prepared at 48%. By state, Queensland led at 50%, ahead of New South Wales at 45.4%, Western Australia at 45.2%, and Victoria at 44.8%; South Australia was last at 43%, despite reporting the most heatwave exposure.
NRMA Insurance meteorologist Kathryn Turner linked the outlook to an intensifying El Niño and the loss of overnight cooling. “What’s key to heatwaves is the lack of overnight relief. When overnight temperatures aren’t cooling back down to average temperatures for many nights in a row, it places extreme pressures on everything – from infrastructure, transport, agriculture, energy, homes, and of course our own health,” Turner said. On longer-term measures, she cited building changes: “Practical measures such as installing proper insulation, increased external shading, upgraded window glazing, improved natural ventilation, and investing in solar panels and battery storage can help properties stay cooler, and ease pressure on infrastructure.”
The awareness-action gap runs across perils. IAG managing director and chief executive Nick Hawkins said the pattern was structural. “Risk is no longer something Australians think about hypothetically, it is something many are experiencing in real time. The IAG Risk Index shows that while awareness of risk is high, confidence and preparedness are not always keeping pace. Strengthening Australia’s resilience means helping people better anticipate disruption, take practical steps to prepare, and recover more quickly when setbacks occur,” he said.
Physical climate risk now carries a reporting obligation. Australia’s mandatory climate-related financial disclosure regime commenced under amendments to the Corporations Act 2001, with the largest entities – Group 1 – reporting for financial years beginning on or after Jan. 1, 2025, according to the Australian Accounting Standards Board. Under AASB S2, in-scope entities must disclose climate-related risks and opportunities and conduct scenario analysis of both acute and chronic physical risk. That obligation builds on Australian Prudential Regulation Authority’s (APRA) prudential guidance CPG 229, which identifies acute physical risk – changes in the frequency and magnitude of extreme weather – as a driver of claims volatility, underwriting assumptions, and the cost and availability of insurance. Chronic heat is a hazard easy to under-model precisely because it produces few property claims, yet it now sits within the scenario analysis regulators and reporting standards expect to see.
For underwriters and actuaries, the through-line is that rising heat exposure paired with a persistent preparation gap bears on assumptions well beyond property lines – from health and life morbidity to business interruption triggered by grid and supply-chain failure. The mismatch across cohorts, with the least-exposed group most prepared and heavily exposed younger and South Australian households least ready, is also a distribution and product-design signal for where mitigation incentives and resilience education are directed. As mandatory disclosure phases in through 2027, the pressure to quantify a hazard that has historically stayed off the claims ledger – and out of the databases the industry relies on – is set to increase.
