Australia Grapples with Soaring Insurance Prices Due to Severe Weather Conditions

Extreme weather events in Australia are costing insurers a staggering $4.5 billion every year, triple the amount compared with three decades ago, new research says.

Population growth in flood-impacted regions and infrastructure not built to withstand the effects of climate change has put swathes of the country at risk, the Insurance Council of Australia (ICA) report warns.

During the 2020s, insurers, on average, have forked out $4.5 billion annually in claims.

This year, nearly $2 billion in losses were caused by three insurance catastrophes: the North Queensland floods, which cost $289 million: ex-Tropical Cyclone Alfred ($1.43 billion), and the NSW Mid North Coast and Hunter floods ($248 million).

The research, citing analysis by global insurance company Munich Re, found financial losses from extreme weather have tripled since the 1990s, even when inflation is accounted for.

“While Australia has always faced extreme weather, the accelerating losses per person and their compounding impact on communities is costly and ongoing,” ICA chief executive Andrew Hall said.

“Australia is in a global race to ensure its built environment has the resilience needed to protect assets – this data clearly shows that each decade is costlier than the last, with insufficient investment in resilience leaving Australians to shoulder an outsized economic burden.”

Since the 1980s, Australia has suffered higher economic costs from extreme weather events on average per person than France, Germany and Canada, the ICA research revealed.

For most of the past 45 years, Australia has ranked second only behind the US for economic and insured losses per capita – and was only pushed into third place in the 2020s by two extraordinary weather events in New Zealand.

One of the most concerning findings of the research is regarding the members of society bearing the brunt of floods.

Of the 242,000 Australian homes most at risk of flooding, 186,000 do not hold insurance policies.

Typically, they are home to residents with average incomes below the national median who are attracted to high-risk land which have properties with lower prices.

“There’s a clear correlation between high flood risk and socioeconomic disadvantage, with our country’s most vulnerable the least likely to have an insurance safety-net when disaster strikes,” the report said.