Significant loss creep on East Australia floods

PERILS most recent loss estimate for the Eastern Australia floods, which occurred during the period of 20 February to 11 March 2022, has increased significantly to $6.3 billion, up from $4.9 billion in May (which compares to an initial estimate of $4 billion in its first loss report six weeks after the event).

Inflation has played a factor in the claims creep with insurers struggling to complete claims assessments, shortages in building labour and supply disruptions driving up loss costs.

Commenting on the loss development, Lukas Wissler, product manager at PERILS, explained: “The observed loss development… is driven by two factors. Firstly, loss estimates collected from affected insurance companies during the interim three-month period increased. 

“In addition, the resolution of the data was also higher with loss information available per postcode and line of business. This is consistent with our standard approach and enables us to carry out a more detailed calculation of the industry loss estimate.”

The loss estimate is primarily composed of personal lines property losses which represent 62% of the total industry loss, while commercial lines property losses represent 28% and motor losses 10%.

Significant damage to NSW

During late February, a monsoon trough was blocked by a high-pressure system across the South-East Queensland and northern New South Wales regions causing considerable rainfall and associated flooding.

In early March, the monsoon trough developed into an East Coast Low moving south which caused heavy rainfall along the New South Wales coast.

”The combined impact over this period resulted in significant flooding and property damage to several northern New South Wales regional towns and the surrounding areas of metropolitan Sydney.

Darryl Pidcock, head of PERILS Asia-Pacific, commented: “This event is now the largest insured catastrophe loss event experienced in Australia. The insurance industry continues to deal with many challenges including completing claims assessments, shortages in building labour and supply disruptions driving up claims costs.

”It remains a very difficult time for policyholders recovering from the flood impacts as well as the insurance industry managing the sheer volume of claims.

”The release of this detailed industry loss footprint can further support the insurance industry’s understanding of flood risks and its impact on the affected regions. These are unprecedented times for our insurance partners, and we are very appreciative of their continued support”.