Standard & Poor’s reports that it is monitoring the effect of the Australian bushfire crisis on the local insurance industry, given that estimates of the insurance claims bill are already exceeding A$150 million and that the fires show no early sign of abating.
“Current indications, however, are that the industry will be able to contend with the higher seasonal claims, with no longstanding effects on the financial strength of the industry,” Michael Vine, director, Financial Services Ratings group, commented.
Estimates of losses from the bushfires that have impacted large tracts of Southeastern Australia, including Australia’s capital city Canberra, are uncertain and are likely to increase over the next week given prospects for a continuation of difficult weather conditions. Current estimates based on public information suggest that more than 500 homes have been destroyed, with more than 2,000 insurance claims lodged, and a likely total claims bill exceeding A$150 million.
The effects of the bushfire crisis on individual insurance companies are being assessed on a case-by-case basis, although Standard & Poor’s currently believes that ratings will not be impacted unless the crisis worsens materially. At this stage, the cost of the bushfires is substantially below that of other Australian natural disasters, including the Sydney hailstorm of 1999 and the Newcastle earthquake of 1989.
“Profitability of the Australian general insurance sector will be negatively impacted due to higher claims costs, although the extent to which individual companies will be affected will not generally be known until threats posed by the bushfires have diminished,” Vine continued. “Standard & Poor’s currently does not envisage any rating changes, but will continue to monitor the situation, including how long the bushfires persist, the number of individual bushfire events for the purpose of assessing reinsurance retentions, the exposures of individual companies to areas affected by bushfires, and an analysis of exposure retained by companies after reinsurance arrangements.”
Was this article valuable?
Here are more articles you may enjoy.