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High level of underinsurance in flood affected areas

The Queensland and NSW floods have caused losses reaching an estimated $2.3 billion. This devastating extreme weather event has deeply impacted many families and businesses.

A survey conducted by the Insurance Council of Australia (ICA) has highlighted a significant level of underinsurance among the affected communities. 

The ICA reported on March 21st that insurers had received 153,769 claims, which is a 2% increase from the previous week’s figures. 

ICA also released results from a survey of more than 1000 people from three flood-prone areas in southeast Queensland and NSW. The survey found that 37% of respondents say they wouldn’t have enough insurance to rebuild. 

Two-thirds of respondents also stated they don’t believe governments are investing enough to properly protect homes and communities from extreme weather events. More than 90% of those respondents said the spending should at least double. 

From the survey the ICA reports that an astonishing 94% of people said there should be better controls on where homes are built so they are not at risk of flood. 

On affordability and availability constraint drivers, the survey finds 47% say flood cover can be difficult or expensive to obtain due to the risk of flood, one in five says it is driven by insurer profits and 11% cite climate change. 

“The Insurance Council has long called for greater investment in measures that better protect homes and communities from the impact of extreme weather,” ICA CEO Andrew Hall said. 

“This most recent flood has unfortunately brought this issue into sharp relief, and now those directly impacted have added their voices to this call.”

The ICA survey was conducted from March 11th-14th across the Northern Rivers, Western Sydney and Greater Brisbane regions. 

If you wish to discuss your home or business insurance options, you can contact Craig from Business Insurance Consulting. 

Email: [email protected]

Phone: 0412 212 099

Credit: https://www.insurancenews.com.au/local/flood-losses-rising-as-survey-shows-high-levels-of-underinsurance

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Personal hardship assistance extended to more flood-affected areas across South-East Queensland

On March 2nd, the Insurance Council of Australia (ICA) stated that insurers received 48,220 claims related to the flooding in South-East Queensland and the New South Wales coast. 

This was a 53 percent increase from the previous day’s claims count, and further demonstrated the significant impact from this event. 

37,807 of the claims were from Queensland, with the remainder from New South Wales. The New South Wales figures are expected to increase, as more policyholders return to their homes and businesses. 

Eight-four percent of the total claims relate to property, with the rest being motor vehicle claims. Insurers do not currently have an estimate of claims costs. 

The personal hardship assistance has been extended to more flood-affected individuals and families, as flooding continues to affect people across South-East Queensland. 

Grants are available through the jointly funded Commonwealth-State Disaster Recovery Funding Arrangements (DRFA) for eligible flood-affected residents in Ipswich, Lockyer Valley, Moreton Bay and Somerset. The personal hardship grants have also been extended to the entire Local Government Area of Gympie Regional Council, Fraser Coast and Sunshine Coast.

The Federal Minister for Emergency Management and National Recovery and Resilience Senator the Hon Bridget McKenzie said that if eligible, the DRFA assistance would provide grants of up to a maximum of $900 for a family of five or more, or $180 per person. 

“These payments are designed to cover essential items such as food and clothing for people who are doing it tough as a result of the floods, in addition to the reconnection of essential services once it’s safe to return home.” 

“Areas affected by flooding in Brisbane and Logan are currently being assessed for the provision of personal hardship financial assistance and those assessments are being progressed as a matter of priority.” 

“Brokers are contacting their clients in affected areas and are offering their assistance,” said NIBA CEO Philip Kewin. 

“The Australian and Queensland governments continue to work closely to support ongoing recovery efforts and identify where further assistance is required to ensure all flooded communities have the assistance they need to get back on their feet.”

You can find more information on Personal Hardship Assistance and Essential Services Hardship Assistance here, or contact the Community Recovery Hotline 1800 173 349. 

Credit: 

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Insurers step up their commitment to tackling climate change

Allianz Australia has stepped up their climate commitment in 2021 by becoming the first insurer to join Climate League 2030. 

Climate League 2030 is a private sector-focussed 10-year initiative that aims to reduce Australia’s annual greenhouse gas emissions, in line with the targets set by the Paris Agreement in 2015. 

The Investor Group on Climate Change (IGCC) launched the initiative in October 2020, starting with investor participants. 

IGCC is a collaboration of both Australian and New Zealand investors focussed on the financial impact of climate change on investments. 

Supporting Climate 2030 means Allianz must commit to taking at least one new action each year that will make a demonstrable contribution to reducing Australian emissions. 

Allianz Australia MD Richard Feledy says the business is “proud” to be the first insurer to join the initiative.

“Allianz is committed to a net-zero emissions future and we are decarbonising our operations, insurance portfolio and investments to help us achieve that goal,” Mr Feledy said. 

“We believe climate risks are better mitigated when we collaborate with other organisations, industries and markets.”

“By joining initiatives such as Climate League, we hope to enable an orderly transition.” 

IGCC CEO Rebecca Mikula-Wright says hopefully more insurers will follow Allianz and join the initiative. 

“More and more investors, banks and insurers are now recognising that reducing emissions on a Paris-aligned pathway represents responsible action to secure a healthy economy for Australia,” she said.

“The Investor Group on Climate Change continues to support other organisations, including hopefully more insurance firms, to join Climate League to support a stronger 2030 national emissions reduction commitment, which will remain in focus in the lead up to COP27 in Egypt next year.”

Allianz also announced changes to reduce their ties with fossil fuels. They are removing thermal coal from proprietary investment and underwriting portfolios and in 2021 the insurer stopped insuring or investing in infrastructure facilities that derive more than half their revenue from thermal coal. 

From 2023, Allianz plans to no longer provide property & casualty insurance or make proprietary investments in companies that plan new coal mines, generate more than 25% of revenue from thermal coal mining, or produce more than 10 million tons of thermal coal annually. 

This focus on handling climate change is no new thing, and has been a hot topic in the insurance industry. 

After a turbulent year last year in terms of extreme weather events, Suncorp CEO Steve Johnston also made comments on the need to face this issue head on. 

“Call it La Nina, climate change, or just bad luck, it really doesn’t matter – the results and impacts are the same.” he said. 

“At a time when homeowners really need adequate home insurance, allowing tax revenue from insurance to keep growing due to climate change makes little economic sense.

“Pushing people out of the insurance market simply transfers the cost of the extreme weather event, and the one after, to the taxpayer.”

Mr Johnston said “climate change is an intergenerational challenge that must be tackled” by setting ambitious targets and providing support for industries and jobs impacted by the transition.

You can read more about what he had to say here

Australia continues to face extreme weather conditions each year. 

If you want to discuss your personal, home or business insurance, get in touch with us today! 

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https://www.insurancenews.com.au/corporate/allianz-steps-up-climate-commitment
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Questions remain after cyclone reinsurance pool details are released

After announcing that they would be going ahead with the long-debated proposal, the Federal Government has quickly moved to develop a cyclone reinsurance pool. 

The draft legislation was released December 2021. It provided various details, but still left key questions regarding the pool unanswered. 

The two-week public consultation period on the draft bill closed on the 17th of December 2021, and the legislation is due to be introduced into Federal Parliament this year, and the pool is set to commence from July. This is ahead of the election due by late may this year. 

The pool will cover cyclone and related flood damage for claims that arise from the beginning of a cyclone until 48 hours after it ends. The cover includes wind, rain, rainwater, rainwater run-off, storm surge, and riverine flood damage. 

The Australian Reinsurance Pool Corporation (ARPC) will administer the scheme, and based on advice from the Bureau of Meteorology they will declare an event. The initial announcements regarding the proposed pool had referred to a region above the Tropic of Capricorn, however the new material simply refers to “cyclones in Australia”, including offshore territories such as Norfolk Island. 

The eligible policies include, household property, residential and mixed-use strata, small business, charity and not-for-profit property policies, and farm residential policies. 

However there are certain restrictions. 

Business property policies would need to have sums insured of $5 million or less and strata and community title properties will be eligible where at least 80% of the total floor space of units are used mainly for residential purposes. Business marine cover remains a work in progress and is set to be included from the middle of 2023. 

This cyclone pool will be mandatory and insurers are expected to start entering into agreements with the ARPC from July. 

Large insurers have until December 31 next year to join the scheme, and small insurers have an extra 12 months to ensure all eligible risks are reinsured with the scheme. 

The pool will be funded by insurer premiums but the scheme is backed by a $10 billion annual Government guarantee. In the case of rare cyclone activity levels that draw down the available funds, the Government guarantee can be increased after talks involving the Prime Minister, Treasurer and Financial Minister. 

Premiums determined by the ARPC will be subject to actuarial review, and won’t include a profit margin. The pricing formula is set to be finalised before July and will use property-level data such as geography, building characteristics, and mitigation. 

Treasury says key principles for the formula include that it should lower the reinsurance cost for most policies with medium-to-high exposure to cyclone risk and have minimal impact on premiums for lower cyclone-risk properties. 

The treasury says it should also maintain incentives for risk reduction and offer discounts for properties that undertake mitigation. 

From July to June 30, 2025, the cyclone pool should cover the entire cost of eligible cyclone and related flood damage claims above the policyholder excess, “to support insurer transition and maximise the potential premium reductions through the pool”. 

After that time, the pool will operate on a risk sharing arrangement with the insurers, where the pool will continue to cover a significant proportion of eligible claims. 

Insurers will continue to manage any of the claims, while the policyholders will still be able to choose their insurer. 

“The scheme is expected to improve insurance access and affordability in cyclone-prone areas, build the financial capability of affected households and small businesses to recover from natural disasters, and support the economic resilience and development of cyclone-prone areas,” the Treasury paper says.

“The scheme is also expected to increase competition by encouraging greater insurer participation in cyclone-prone areas and support higher levels of insurance coverage by property owners.” 

Pricing and the pass-through of savings from the scheme will be monitored by the Australian Competition and Consumer Commision. The first review is scheduled for three years after it commences, and every five years thereafter. 

While the scheme is expected to commence in July this year, critical issues around the setting of premium pricing are still to be determined. Debate continues about the breadth of this cover, and the expected level of savings for policyholders remains unknown. 


You can read the draft legislation, along with further details here. 

Credit: https://www.insurancenews.com.au/analysis/cyclone-pool-details-revealed-but-questions-remain

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Worldwide losses from natural disasters on the rise

In 2021, natural disasters caused substantially higher losses worldwide when compared to the previous 2 years, according to the Munich Re 2021 Nat Cat report. 

From the data, Munich Re discovered that storms, floods, wildfires and earthquakes, and other extreme weather events destroyed assets totalling US$280 billion. This was a massive increase from US$210 billion in 2020, and US$166 billion in 2019. 

Only US$120 billion of the 2021 losses were insured, but this was up from US$82 billion in 2020 and US$57 billion in 2019. 

The United States accounts for a large share of these natural disaster losses in 2021, costing around US$135 billion. Tornadoes, tropical storms and deep freeze were the extreme weather events responsible for major losses in the USA in 2021. 

Torrential rainfall triggered severe flooding in Europe that resulted in devastating losses to local areas, especially in western Germany. Within the affected regions of Europe, this rainfall was the highest in over a hundred years. 

In the River Ahr in Rhineland-Palatinate, the flash flooding swept away countless buildings and severely damaged infrastructure, including railway lines, roads and bridges. The death toll was over 220 people. 

This natural disaster caused losses of US$%54 billion. 

In the Asia-Pacific, the losses from natural disasters remained modest in comparison. The overall economic loss was US$50 billion, with only US$9 billion being insured. 

This region accounted for 18% of overall losses, with the costliest from natural catastrophes being a severe flood in Henan Province in central China. 

Many rivers, including the Yellow River, burst their banks and hundreds of thousands of homes were flooded. 

Overall losses in the Asia-Pacific region totalled to US$16.5 billion, and only 10% of these were insured losses. 

Ernst Rauch, chief climate and geoscientist at Munich Re and head of the climate solutions unit, said the latest disaster statistics are striking as these extreme weather events are likely to only become more frequent or severe due to climate change. 

“Among these are severe storms in the USA, including in the winter half-year, or heavy rain followed by floods in Europe. For hurricanes, scientists anticipate that the proportion of severe storms and storms with extreme rainfall will increase because of climate change,” Rauch said.

“Even though events cannot automatically be attributed to climate change, analysis of the changes over decades provides plausible indications of a connection with the warming of the atmosphere and the oceans. Adapting to increasing risks due to climate change will be a challenge.”

Natural disasters in 2021 were devastating to many, and many scientists believe this will only get worse in 2022 and later as climate change continues to be a risk factor. 

Many of these catastrophic losses weren’t insured, and will leave families and businesses with long term impacts. 

If you want to discuss insurance for you or your business, get in touch

Credit: https://www.insurancebusinessmag.com/au/news/natural-catastrophe/munich-re-natural-disasters-losses-soar-in-2021-321577.aspx