Australia Christmas storms industry loss estimated AU $1.4bn by PERILS

The insurance industry loss estimate from severe storms that affected eastern Australia through the Christmas period has been initially estimated at AU $1.395 billion (around US $905m) by PERILS AG.

PERILS has taken the time period of 23rd to 29th December for its initial loss estimate due to the common hours clause in use in Australia, which makes it hard to compare with others, given the storm damage continued through the New Year period as well.

Previously, the Insurance Council of Australia gave a AU $743 million estimate for damage from severe weather and storms from 23rd December to 3rd January.

So, PERILS estimate is clearly much higher and for a shorter period, driving home the insurance market impact from these events.

PERILS said the Australia Christmas Storms affected the states of Victoria, New South Wales, and Queensland during the period of 23rd to 29th December 2023, and that its AU $1.395 billion insurance market loss estimate covers the property and motor hull lines of business.

The severe convective storm activity saw large hail, intense winds, flash floods, and tornadoes driven by a low-pressure system over southeastern Australia which was blocked by a high-pressure system over the northern Tasman Sea.

This system drove numerous convective storm cells and intense thunderstorms, while it was the impacts of large hail, strong winds, tree fall and flying debris as well as flash floods that drove the insured damages.

On the duration of the event, PERILS noted, “In Australia, storm event definition clauses for reinsurance purposes vary and can include meteorological conditions and/or loss aggregation periods with the majority being 168 hours. PERILS generally follows the predominant clause and as a consequence the losses from the Christmas Storms are aggregated into one single insurance event for the period of 23 to 29 December 2023.”

Darryl Pidcock, Head of PERILS Asia-Pacific, said “Australia experienced a relatively benign 2023 compared to more recent years from a natural catastrophe perspective. The 2023 Christmas Storms were the largest Cat loss for the Australian insurance industry for the calendar year.

“They concluded a record year of severe convective storm losses for the global insurance industry. However, for Australia, this event is not unusual when compared to the South-East Queensland Hailstorms (“Halloween Storm”) of October 2020 (AUD 1,222m at the time) or the January 2020 Hailstorms (AUD 1,887 at the time). Furthermore, the severe convective storms which hit Victoria yesterday [13 February] serve as a timely reminder of the industry’s exposure to this atmospherical peril.”

In previous years, an event like this would likely have attached some reinsurance protection for Australia’s main primary insurers, but this time while Suncorp highlighted its reinsurance protection when it reported its initial claims, it remains uncertain whether any excess-of-loss reinsurance layers could attach, or whether the only reinsurance market impact will be via quota shares, given the now higher attachment points and lower amounts of aggregate coverage in-force.