Flood Damage: A Disproportionate Risk to Known Exposure
Flood Damage: A Disproportionate Risk to Known Exposure
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Flood events have accounted for a staggering 54% of losses from declared insurance events in the past five years.
Surprisingly, these losses occur even though only a small percentage of properties are known to be at risk, according to a submission by the Insurance Council of Australia (ICA) to a parliamentary inquiry.
Australia has over 674,000 properties facing a risk of 1-in-100, 1-in-50, or 1-in-20-years. Out of these, 229,455 properties are at a 1-in-20-year risk, equivalent to a 5% annual exceedance probability.
Andrew Hall, CEO of the ICA, expresses the industry's commitment to improve flood response and appreciates the opportunity to submit their findings to the House of Representatives economics committee.
"Our data analysis also reveals that flood damage is wildly disproportionate to the number of exposed properties. By focusing our mitigation efforts on the most affected areas, we can alleviate the burden for everyone," says Andrew Hall, ICA CEO.
Floods often lead to costly insurance claims and have been the primary cause of losses in recent years, mainly due to weather conditions influenced by climate drivers that cause increased rainfall in eastern Australia.
An analysis of the National Flood Information Database shows that more than half of the properties at a 1-in-20-year risk are located in New South Wales, with the majority of the remaining properties in Queensland and Victoria.
The ICA's submission to the committee inquiry on insurers' responses to last year's floods announces the release of a series of policy papers in the coming months. These papers will examine the nation's "protection gap" and affordability of insurance coverage.
In their submission, the ICA highlights key findings from the recent Deloitte report commissioned by the industry, focusing on the floods that occurred in NSW and Queensland in February and March. The report includes recommendations that have been accepted in principle by the ICA.
The ICA emphasizes the need for action to reduce risks, including increased spending on resilience, improved land use planning, and reforms to building codes. Additionally, they draw attention to the impact of insurance taxes on premiums.
The final report from the inquiry is expected by the end of September next year. A hearing, originally scheduled for Wednesday, has been postponed to the new year.
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Reinsurance: Insurance that an insurance company purchases from another insurance company to mitigate risk.
