The Victorian bushfires are another reminder that climate catastrophe risk remains high, with implications for premium affordability, Willis says.

“The experience of recent seasons, both in Australia and internationally, highlights the importance of preparedness and continuing need for insurers, asset owners and businesses to reassess risk accumulations and strengthen resilience strategies,” head of Pacific James Baum said.

The fires are Victoria’s worst since the 2019-20 Black Summer, and the Insurance Council of Australia said yesterday that insured losses have exceeded $200 million.

A Willis report released today cautions against complacency after global insured losses last year came in below the average for the past decade.

It notes that even without a major US hurricane, natural catastrophes losses still topped $US100 billion ($1.41 billion) – the figure long considered a benchmark for escalating risk.

“While the market may take a moment to exhale, context is crucial here,” the report says. “A below-average loss year is not an anomaly. Statistically, it is the expectation.

“Because catastrophe risk is heavily skewed by tail events, the average will always be driven by a handful of very active years, leaving the majority of years falling below the mean.”

Willis’ Natural Catastrophe Review says even if losses appear muted, the risk remains on an upward trajectory. 

“Meteorological luck can delay the inevitable but does not offer lasting protection.

“The question is whether the industry uses this pause to relax or to prepare for when the pendulum inevitably swings back.”

The report says continuing to raise premiums to keep pace with mounting losses from hurricanes, wildfires and other perils may make financial sense but is indicative of a growing crisis facing the industry. 

“For consumers, paying more for home insurance doesn’t make you any more prepared for disaster.”

Many US insurers are still losing money on their home portfolios, despite raising premiums, because they are paying record claim sums due to natural catastrophes, the report says.

“And when companies withdraw coverage from high-risk properties or entire jurisdictions, what remains is a diminished market for insurance products and higher geographic concentrations of risk.”