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Bushfire losses set to pass $1 billion

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Insured losses from the ongoing bushfire catastrophe which has devastated areas of NSW, Victoria, Queensland and SA have reached $939 million, and are still rising.

The Insurance Council of Australia (ICA) figure is drawn from 10,550 claims from the catastrophe which was declared on November 8.

But adding two previous bushfire catastrophes (Rappville, NSW and northern NSW/southern Queensland) from October and September brings the total loss figure to $995 million.

The figure is still a long way short of losses from 2009’s Black Saturday disaster ($1.8 billion in normalised dollars) and 1983’s Ash Wednesday ($2.5 billion in normalised dollars).

However, the amount of land burned in this summer’s catastrophe – believed to be more than 10 million hectares – eclipses those two previous disasters.

And the amount of damage caused so early in the season is thought to be unprecedented, as is the number of homes destroyed in Queensland, which has not historically seen large losses.

As previously reported by insuranceNEWS.com.au, insurers discussed the industry’s response to the crisis with the Federal Government in what was described as “a positive meeting” earlier this week.

Yesterday the Australian Securities and Investments Commission put the industry on notice saying that it expects those handling claims to do so “with the utmost good faith”.

ICA CEO Rob Whelan has already given assurances that insurers are committed to dealing “compassionately and sensitively” with customers and are “ensuring the claims process runs as painlessly and seamlessly as possible”.

The National Insurance Brokers Association (NIBA) has established a bushfire community support initiative to advise people who have suffered losses in the catastrophe.

“Past experience shows that at times of major disasters and community disruption, many people need guidance, help and assistance with their insurance claims,” NIBA CEO Dallas Booth said.

“This is a fundamental part of the services brokers provide to their clients and this is what they are pleased to be able to offer to the bushfire victims.”

The community service initiative encourages people to call NIBA’s Need a Broker hotline (1300 531073) so a member of the team can put them in touch with someone who can help with their claim.

Insurers have announced that they are making donations, and taking action to ease the burden faced by communities, in addition to ramping up resources to assist policyholders.

QBE this week announced $400,000 to support relief efforts, adding to $100,000 pledged in November, and will waive excess payments for bushfire-related insurance claims for individual policy holders.

Suncorp said yesterday it had increased its donation to the bushfire relief effort to $500,000, while IAG’s NRMA helicopter has been made available to the NSW Rural Fire Service.

According to various ratings agencies, Suncorp and IAG, which together control more than half the personal lines market, will bear the brunt of fire-related claims in the form of weaker earnings.

At the same time, the agencies believe the insurers and wider industry are financially equipped to cope with the fallout with sufficient reinsurance covers to mitigate the losses.

Other additional buffers include the high level of reserves they hold and a history of strong underwriting discipline.

“Insured losses will continue to mount over the coming months as claims are lodged and damage assessments are completed,” Moody’s Investors Service said in a report yesterday.

“The insured losses of these natural catastrophes will be negative for profits of the Australian property and casualty insurance industry. However, we expect the losses to be manageable because of the industry's strong underwriting performance, high level of reserve adequacy and capital, and strong reinsurance protection.”

The Moody’s assessment echoed that of Fitch Ratings and S&P Global Ratings, which earlier this week made similar forecasts.

S&P says the major insurers have “strong stop-loss and aggregate reinsurance programs to absorb losses at or around their natural peril allowances.” It says they also have further extensive catastrophe reinsurance protection.

Fitch, citing the Townsville floods last year and Sydney hailstorms the year before, says major insurers have “continually increased their natural hazard allowances” to deal with growing frequency and intensity of extreme weather events.

Suncorp, for example, raised its natural hazard allowance by $100 million to $820 million for this financial year. The business also bought an additional $200 million natural perils reinsurance cover on top of this allowance.

An investor update yesterday from Suncorp puts the cost of the bushfire catastrophe at $315-345 million. The estimates are made based on more than 2600 claims that have been received since September.

Earlier this week, IAG said it has received more than 2800 claims with the majority related to residential properties.

IAG says it is too early to provide a precise outcome but anticipates its net natural peril claim cost in the December half will be about $400 million, which is above the $320 million allowance it has set.