The Australian wildfires have deservedly received extensive news coverage with vivid pictures portraying the immense damage and scale of these fires which have been raging predominantly in south-east Australia but also across all six of the Australian states (New South Wales, Victoria, Queensland, Western Australia, South Australia and Tasmania) following the earlier start than normal of the widlfire season in September 2019.
The pictures cannot fully reflect either the immense acreages being consumed (20 to 25 million acres cited) or the tragic loss of life (24 being the latest figure) or the heroism of the 2,000 approx. volunteer firefighters who are risking their lives to protect property and to temper the spread of the fires. There has been a recent spell of cooler weather which has enabled firefighters to strengthen containment efforts around the biggest fires. Higher temperatures and stronger winds are unfortunately expected to reoccur over the coming week.
The long-term impacts of these wildfires on individuals, their farms and towns is only just beginning to emerge. There may well be eventual political consequences and probably long-term environmental effects on the Australian ecosystem; whether there is a continuation of the current three-year drought will be critical to recovery and future wildfires.
From an insurance point of view, The Insurance Council of Australia reported yesterday that its estimates for damage claims stand at AU$700m (US$485m/£367m) based upon some 6,000 approx insurance claims received so far. Damage estimates are expected to rise significantly and it will be some time before an established number can be produced especially as the wildfires continue to burn and the assessments of damaged properties are only just starting in some areas because the logistical challenge is considerable with many areas still inaccessible and remote. The US analyst firm Dowling estimates insured losses could reach US$1bn to US$2bn.
Local insurance companies will have bought reinsurance cover for catastrophes such as these which will limit the effect on them; how much will arrive at Lloyd’s doorstep is impossible to reckon at this stage but it is not thought to be particularly significant by comparsion with US-landfalling hurricanes. Compared with previous Australian wildfires, the number of homes destroyed by this event is similar to the 2,000 destroyed in 2009. The largest number destroyed was in 1983 at 3,700 in the Ash Wednesday fires of 1983. Based upon 2017 values, this event would have cost AU$2.3bn (US$1.597bn/£1.21bn) of insured values.
We remain cautious about the impact on syndicates at this early stage.
Hampden has many clients in Australia and we would like to take this opportunity to say that our thoughts are with them and their families and we hope that any consequences have not been too personally damaging to them or their relatives.