Insurance giant IAG has the biggest financial exposure to theNSW bushfires, and the damage bill is expected to run into the hundreds of millions of dollars over the next week.
As politicians argue about whether the current fires are caused by climate change, the insurance industry is already preparing for more bushfires, cyclones and other natural disasters.
The Insurance Council of Australia on Monday said insurers had received 150 claims from catastrophe areas, which also include parts of Queensland, but the number was expected to rise when home owners are allowed to return to their properties to assess the damage.
IAG, through its brand NRMA, is the dominant insurer in NSW, including on the mid-north coast, which is the epicentre of the worst fires in the state that have destroyed more than 150 homes.
Other smaller insurers, including Suncorp and their brands AAMI and Bingle, will also have some exposure to the scores of bushfires burning across NSW and Queensland.
The Insurance Council has made a “catastrophe declaration” for the NSW mid-north coast, which allows the fast-tracking of processing of claims.
The council’s head of communications, Campbell Fuller, said it was early days in determining the full impact of the fires, an ominous warning of the long, hot summer ahead.
“Many areas are still closed and home owners can’t even get to see if their homes are destroyed,” he said.
A spokeswoman for IAG, which owns NRMA Insurance, CGU Insurance and WFI Insurance, said they had so far received 76 claims, including 73 in NSW and three in Queensland.
“With fire conditions expected to worsen tomorrow across NSW, we’re encouraging everyone to listen to the advice of emergency authorities and take steps to prepare their homes and properties,” the spokeswoman said.
IAG shares closed down 0.51 per cent to $7.83.
Bushfires are different from other natural disasters, including cyclones, because they are mostly in rural or sparsely populated areas.
The financial impact of bushfires for insurers is considerably less than cyclones or even hail storms hitting capital cities.
While the damage from a cyclone may partially destroy a home – causing tens of thousands of dollars in damage – a bushfire wreaks total devastation, normally completely destroying a home and causing hundreds of thousands of dollars in damage.
A report released earlier this month by IAG and the US National Centre for Atmospheric Research found climate change would result in increased bushfire risk in all states, leading to more frequent extreme heat and longer fire seasons, particularly in south-east Australia.
“This will result in reduced intervals between fire events, a higher intensity, lower fire extinguishments and an increase in fire spread,” the report says.
By 2050, the frequency of extreme fire danger is expected to increase by up to 70 per cent in south-east Australia.
The extension of the length of the fire season will also reduce the window of opportunity for fuel-reduction burning in winter.
The report also showed that tropical cyclones normally confined to North Queensland would start to work their way further down the east coast.
IAG executive general manager of natural perils, Mark Leplastrier, said the finding highlighted the need for resilience and mitigation planning by individual communities to adapt to the impact of climate change.
“With the annual economic cost of natural disasters predicted to hit $39 billion by 2050, we need to invest more as a nation to better protect communities,” he said.
“This includes adequate land planning and building codes to ensure our infrastructure is able to withstand extreme weather, especially for cyclone and flood-prone regions.”
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