Analysts say insurers are equipped to absorb historic Aus. bushfire losses

The disastrous 2019-2020 Australian bushfire season — so far burning over 10 million hectares across southern and eastern Australia, claiming 30 lives and killing an estimated billion animals — will undoubtedly be one of the costliest on record.

As of January 24, 2020, losses from submitted insurance claims had reached $1.1 billion (AUD 1.7 billion), according to estimates by the Insurance Council of Australia (ICA), and the numbers are sure to climb.

The bushfire crisis began in September 2019 and remains to be an ongoing event. Insured losses will undoubtedly rise before the 2019-2020 season is over as claims continue to roll in, damaged sites become accessible for loss assessments, and as fires continue to break out over the next few months.

Analysts warn the total economic losses from the 2019-2020 bushfire season have the potential to be significant, particularly for directly impacted industries in the region, especially tourism. Recent flooding and anticipated future flood events may also increase the loss burden for Australian insurers.

But despite the historically high cost of damage inflicted by the bushfire crisis, analysts at AM Best say insurers are poised to absorb the losses.

Impacts on insurers, reinsurers

In its published commentary on the bushfire crisis, AM Best says it believes Australian insurers are well-capitalized and should be able to withstand losses from the recent bushfires, aided by support from reinsurance partners.

However, AM Best analysts add that these significant losses for reinsurers may result in upward pressure on reinsurance rates and a tightening of terms and conditions in upcoming renewal windows.

The report adds that claims activity will involve personal lines and commercial lines portfolios. The latest numbers indicate that so far, over 2,800 homes and buildings have been destroyed in the bushfires. In addition to these personal lines claims, insurers will also see claims activity among commercial lines portfolios as the fires have impacted both the farming and tourism industries, in particular, which have suffered property, livestock, and business interruption losses.

AM Best says the completed assessment of these commercial losses may drive significant increases in loss totals.

See also:

• Australia’s wildfire crisis: Key numbers behind the disaster
• Australian wildfire claims top 6,000 at a cost of $300M as fires rage on