Insurers incurred $2.19bn in claims from extreme weather in 2023-24: ICA

Insurance Council of Australia’s “Insurance Catastrophe Resilience Report 2023-24”, disclosed that insurers incurred AUD 2.19 billion in claims from declared extreme weather events this year, in line with the previous 12 months.

In monetary terms, over the last 30 years insurers paid an average of AUD 2.1 billion per year to customers impacted by extreme weather events, but looking at just the last five years the average annual cost of extreme weather claims has more than doubled to AUD 4.5 billion, driven largely by the growing cost of flood.

While total premiums collected by insurers grew from AUD 50 billion in 2012 to AUD 86 billion in 2023, insurer profits have not kept pace, remaining flat over that period, explained ICA.

The number of claims from events in the past 12 months was almost 157,000, translating to 66,000 more claims than last year, proving that despite lower average claims from recent weather, the impact was more widespread.

The ICA also warms that the impact of extreme weather on the Australian economy has more than tripled over the last three decades. Insured losses from declared insurance catastrophes have grown from 0.2% of GDP from 1995 to 2000 to 0.7% in the last five years.

The costliest natural catastrophe in 2023-24 was the Christmas storms that impacted the Gold Coast hinterland, New South Wales and Victoria, comprising AUD 1.33 billion in claims.

Andrew Hall, Chief Executive Officer, ICA, commented, “The ICA’s latest Insurance Catastrophe Resilience Report shows the impact of extreme weather on our communities over the past 12 months. Flood is Australia’s most costly natural peril, and it’s estimated that around 1.2 million properties face some level of flood risk.

“Around 230,000 of these have a 1 in 20 chance of a flooding each year, with a further 420,000 properties facing a 1 in 50 or 1 in 100 annual chance of flooding, odds that translate into higher premiums which can lead to a growing protection gap.”

Individual customers were impacted by ex-TC Jasper which hit Far North Queensland in mid-December, where the average claim was AUD 36,000, three times the average claim for the Christmas storms.

ICA in the report also elaborated on the need for policy solutions which include improved land use planning, stricter building codes, and ongoing investment in resilience measures such as flood levees and home strengthening to improve community and household resilience to extreme weather.

Hall continued, “In the last few years Australian policymakers have started to think more seriously about this issue, and in many ways we are leading the world in our approach to extreme weather risk mitigation and insurers’ product offerings that respond to these risks. But we need to redouble our efforts if we are to manage the impact of worsening extreme weather amid a changing climate.

“De-risking is the only sustainable way to reduce the pressure on premiums and close the protection gap: improved planning so no more homes are built in harm’s way, stronger buildings that are better able to withstand extreme weather, greater investment in public infrastructure to protect communities, and an ongoing program of home buybacks where no other mitigation is possible.”

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