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May 2023

Australia: East coast floods to result in pricing hikes, exclusions and inflation

Source: Asia Insurance Review | Apr 2022

Australian insurance broker Honan says that the flooding event ravaging the east coast of Australia has implications for insurance pricing, policy wording and other considerations.
With losses from the floods still evolving, Honan has assembled a list of considerations insurers are likely to face, together with expected impacts for policyholders:
  • This latest flood event, that started in late February, will prolong an exit out of the hard market.
  • The costs of the 2010-2011 Queensland floods totalled A$2.4bn ($1.7bn), however, the 2022 flood could exceed this figure.
  • Underwriters are expected to respond by focusing narrowly on risks sitting within postcodes impacted by this year’s flood and going back to 2011. If they haven’t already, insurers could further limit or exclude flood cover.
  • A high volume of non-damage business interruption claims could contribute significantly to the total volume of claims from this flood event. 
  • The way insurers price for this insurance cover is likely to change significantly.
Honan head of placement Travis Wendt said in a commentary posted on the firm’s website, “In the short term, we anticipate underwriting moratoriums to be placed on new business in flood-exposed regions. As the situation progresses, insurers will no doubt look to recover these losses in the form of pricing increases, the level of which will vary case-by-case.
On 9 March 2022, prime minister Scott Morrison declared the flooding event wreaking havoc in southeast Queensland and New South Wales a national emergency, prompting federal intervention. Meanwhile, the Insurance Council of Australia has received more than 140,000 claims relating to the event thus far, with insured losses estimated at over A$2.1bn. A 

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