Premiums soar as peril worsens
AUSTRALIA has been re-rated on international re-insurance markets after another summer of flooding and extreme weather raised the country's peril profile, Rob Whelan, chief executive of the Insurance Council of Australia, has said.
As a result, Australian insurers must pay more for re-insurance, costs they will pass on to customers. "Those [re-insurance] premiums have increased in some cases by as much as 50 per cent," Mr Whelan said.
Many policyholders have expressed anger at sharp increases in premiums. Data from the Australian Prudential Regulation Authority indicate premiums rose 16.4 per cent for domestic home and contents coverage in the year to the end of September and 13.9 per cent for commercial property insurance.
Flood coverage premiums have soared, with increases of 300 per cent or more prompting holders in flood-risk areas to drop cover.
Mr Whelan defended the tougher line on flood insurance. "Insurers must rate to risk," he said. "If they don't, they have a real difficulty in terms of solvency."
Insured losses from the ex-cyclone Oswald now exceed $732 million with 70,000 claims.
The losses remain a fraction of the $2.5 billion from the 2011 Queensland floods but the tally will rise. It excludes losses from bushfires, which are also certain to rise as Victorian and West Australian authorities continue to battle blazes.
Heinrich Eder, managing director of Munich Re for Australasia, said the disasters in January showed "the vulnerability of Australia" to natural perils "especially weather-related catastrophes". Such events have more than tripled in the past three decades "and this trend is most likely to continue", he said.
A spokeswoman for rival re-insurer Swiss Re said: "When natural catastrophes happen, the insurance industry uses the claims data to update the models used to assess and price risk."
In its submission to the Senate inquiry into extreme weather preparedness, which holds its first hearings in Melbourne on Wednesday, IAG says rainfall analysis suggests "an increased frequency of major river flooding in a fairly large area" of central WA and the region taking in central South Australia, south-west Queensland and inland NSW "for the warmer part of the year".
Addresses with "extreme" risk from floods number 3860 in NSW and 51,506 in Queensland.