Australia's top five most expensive natural disasters revealed

Australia's top five most expensive natural disasters revealed | Insurance Business Australia

Australia's top five most expensive natural disasters revealed

Insurance Business has put together a list of the top five most expensive natural disasters in Australia’s recent history. Sydney’s hailstorms in 1999 come in first place with the total losses from claims in today’s dollar value amounting to $5.8 billion. The list represents the costliest catastrophes in terms of insurance claims from 1970 until the present day:

  1. Hailstorms, 1999, Sydney. Claims costs today about $5.8 billion and total financial costs possibly much more.
  2. Black Summer, 2019/20 NSW, VIC, SA and QLD. Claims costs about $5.5 billion versus total financial costs of about $10 billion .
  3. Tropical Cyclone Tracy, 1974, Darwin. Claims costs today about $5.3 billion versus total financial costs of about $7 billion.
  4. Earthquake, 1989, Newcastle. Claims costs today about $4.4 billion versus total financial costs of about $8.7 billion
  5. Floods, 1974, Brisbane. Claims costs today about $3.3 billion versus total financial costs of about $8.2 billion.

John Farrell, (pictured above) director of Steadfast Taswide Insurance Brokers said he’s not surprised that a hailstorm tops the list.

“People think that bushfires are the big claim hits and they are, don’t get me wrong, because they spend a lot of time in the media when they’re going on and sometimes these bushfires go on for weeks and months,” he said.

However, said Farrell, storms are often the big hitters when it comes to the actual number and cost of insurance claims.

“A storm comes in one day and it hits one day, and it’s gone the next. Yes, it might only be on the TV once but if you have a look at the top 10 claims paid in recent Australian history most of them are storms, because they get everyone,” he said.

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Seven out of the 10 most recent natural disasters on the ICA’s Historical Catastrophe List were storm driven events, including extreme weather and hailstorms. Among those events: severe weather and flooding in Victoria’s Gippsland in June this year; the March flooding and storm damage that impacted Sydney, the Hunter Valley and the Mid North Coastal areas; and, the Halloween Hailstorm on October 31, 2020, when severe thunderstorms impacted Central and South East Queensland, causing high winds and hail and resulting in more than $1 billion in damage claims.

There are certain caveats to declare about IB’s top 5 natural catastrophes list. The analysis only goes back half a century - so to the 1970s. The figures are based on information from the Insurance Council of Australia (ICA) and other respected sources, including the recent Royal Commission into National Natural Disaster Arrangements. Most of the original claims losses data came from the ICA’s Historical Catastrophe List. The figures estimating total losses from a disaster are generally the ones that appear most often in news reports and have credible sources. The conversion of the claim losses into today’s dollar value amount was made using the Reserve Bank of Australia’s (RBA) online inflation calculator tool. This list is a ranking according to financial costs only and obviously doesn’t take into account loss of life.

The ICA provided further details about the considerations that go into producing its loss data. The Insurance Council generally estimates that about 95% of homes are insured but this can vary across regions and communities. The ICA data generally covers domestic damage (including home, contents, motor) and SME damage (including commercial businesses, business interruption and farms. The data doesn’t include damage to infrastructure like roads, rail, powerlines, phone lines, gas and water supply. State owned assets or other large infrastructure assets like ports, wharfs, power stations and uninsured properties are also not captured by ICA data.

Earlier this month, Deloitte Access Economics released its disaster update report commissioned by the Australian Business Roundtable for Disaster Resilience and Safer Communities.

Read next: Large parts of Australia could become 'uninsurable,' climate expert warns

The Update to the economic costs of natural disasters in Australia showed that natural catastrophes currently cost the Australian economy $38 billion per year. The cost is expected to increase to $73 billion per year by 2060 in a low emissions scenario or $94 billion in a high emissions scenario. Two thirds of the costs from natural disasters over the next 40 years are expected to be incurred in QLD and NSW. These impacts, said the report, will be the result of more tropical cyclones and floods, as warming oceans push tropical cyclones further south.