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Australia ‘heavily exposed’ to secondary perils

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The hailstorm that hit Sydney last December was further confirmation of the growing risk to insurers from secondary natural perils, Swiss Re’s latest Sigma study says.

Other perils in this category include river floods, bushfires, flash floods, landslides, torrential rainfall and droughts, plus fallout from primary perils such as hurricane-induced rain, storm surges, tsunamis and land liquefaction.

“Australia is heavily exposed to secondary perils,” Swiss Re Head of Property Treaty Underwriting for Australia and New Zealand David Sinai said.

“Secondary perils are typically weather-related, so we might expect that climate change will have an influence on secondary peril loss outcomes in the future.

“As our world warms, we will experience increased atmospheric energy – more storms; a warmer atmosphere, which can absorb more moisture, leading to more intense rainfall events; and more heatwaves driving an increase in bushfire losses.”

The Sigma study estimates insured losses from secondary perils exceeded 60% of the $US76 billion ($106 billion) the industry paid last year on natural catastrophe claims.

It was the second year running that second-tier hazards, loosely termed as those not covered by catastrophe models, were responsible for at least half of natural catastrophe losses.