Bushfires in Australia, which started last September, have caused insured losses of nearly A$1bn (US$692m) to date.
The Insurance Council of Australia increased to more than A$900m its estimate of damage claims from the fires, and they are expected to jump further.
The disaster has killed at least 28 people, claiming 2,000 homes, raging across more than 10m ha of land and destroying wildlife and livestock.
The bushfire crisis will also have a major economic effect as economists warn about half a percentage point will be wiped from national economic growth.
Westpac estimated total bushfire economic losses to date at about A$5bn. It forecast a hit of 0.2-0.5 percentage point on GDP.
Prime Minister Scott Morrison flagged the royal commission which will look at the impact of climate change, the operational response at a state and local level and the role of the federal government.
He said that Australia must prepare for "a new normal" with more severe bushfires, floods, cyclones and drought, reported 9News.
Insurance industry at the forefront of environmental risk
Moody’s Investors Service says that the insurance losses from the bushfire crisis will mount, but Australian property and casualty insurers will likely be able to manage the impact, given their strong underwriting performance, high level of reserve adequacy and capital, and strong reinsurance protection.
Mr Frank Mirenzi, a Moody’s vice president and senior credit officer, said, “Despite the manageable impact for insurers, the catastrophic fires highlight that the P&C insurance industry is at the forefront of environmental risk.
“The industry is exposed to the economic consequences of climate change, primarily through the unpredictable effect of climate change on the frequency and severity of weather-related catastrophic events, such as hurricanes, floods, convective storms, drought, and wildfires.”
Moody’s said Suncorp Group, through its subsidiary AAI, and IAG will likely receive the largest sum of gross claims, because of their significant market share in home and motor insurance. The bushfires will also adversely impact QBE and international insurers Allianz SE and Zurich Insurance through higher natural peril costs.
S&P Global Ratings has also said that Australian insurers can absorb growing insurance claims arising from the bushfires, the international credit rating agency notes that major insurers have strong stop-loss and aggregate reinsurance programmes to absorb losses at or around their natural peril allowances, as well as further extensive catastrophe reinsurance protection.
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