Australian Insurers Face $1 Billion Storm Losses

June 14, 2007

The latest, and admittedly still preliminary, estimates from the series of violent storm that struck the coast of New South Wales last week (See IJ web site June 11) indicate that insured losses will exceed A$1.2 billion (US$1 billion), making it one of Australia’s costliest disasters.

Insurance Australia Group (IAG), which earlier announced that it had already received over 6000 storm related claims (See IJ web site June 12), has issued a second bulletin, indicating that the claims have increased to over 9000. IAG said it is “now of the view that the ultimate number of claims and related costs will lead to the Group making claims on its catastrophe reinsurance covers and the total pre-tax loss, net of reinsurance, is reasonably likely to reach the maximum Group exposure of A$169 million [US$141.5 million.”

IAG’s bulletin also noted that before the storms hit it “expected to report net earned premium of $6.747 billion [US$5.65 billion] and an insurance profit of A$894 million [US$710 million] (pre-tax), representing an insurance margin of 13.3 percent. A total claims cost net of reinsurance would reduce the consensus insurance profit to A$725 million [$607 million], which would be an insurance margin of 10.7 percent.”

Australia’s other big property insurer, the Suncorp-Medway Group, has not yet commented on the possible effect of the storms.

The QBE Group issued a short statement in response to analysts’ queries, which said: “We confirm that our estimated net claims are within the substantial allowance for large losses and catastrophes included in our targets for 2007 previously notified to the market.”

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