Claims inflation, due to rising labour and supply costs, is a key driver of the loss creep
PERILS, the independent Zurich-based organisation providing industry-wide catastrophe insurance data, has disclosed its second industry loss estimate for the Eastern Australia floods, which occurred between 20 February to 11 March 2022.
The second estimate of the insurance market loss is $4.9 billion, up from an initial loss estimate of $4 billion, which was issued on 19 April 2022. The loss estimate includes losses from the property and motor hull lines of business and is based on loss data collected from the majority of the Australian insurance market.
From 20 February to 11 March 2022, an extended period of heavy rainfall along the east coast of Australia caused major river and surface water flooding.
A monsoon trough along the South-East Queensland and northern New South Wales coast was blocked by a high-pressure system resulting in the extended period of rainfall and associated flooding.
An East Coast Low developed in early March as the monsoon trough moved southwards, bringing onshore moisture and heavy rainfall to the New South Wales coast during early March.
Darryl Pidcock, head of PERILS Asia-Pacific, commented: “The complexity and volume of claims caused by this weather event are presenting significant challenges to the insurance industry which is reflected in the increase in PERILS’ second loss estimate.
“A key driver is claims inflation due to rising labour and supply costs which has become a critical issue for the industry. Following PERILS’ initial loss estimate, we have also adjusted the event loss period which now runs from 20 February to 11 March. This better reflects the range of loss periods applied to this event by affected insurers as there is no common market standard applied to the event definition.”