MARCH 30, 2021 02:48 PM (EDT)
Best’s Commentary: Australia Flooding to Cut Into Insurers’ Earnings; Add to Upward Pressure on Reinsurance Rates
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Alex Rafferty, ACA
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FOR IMMEDIATE RELEASE
SINGAPORE - MARCH 30, 2021 02:48 PM (EDT)
AM Best expects the severe flooding in Australia’s eastern states to put pressure on insurance companies’ underwriting results over the near term and add to the industry’s recently elevated loss burden from natural catastrophe events. Furthermore, with the majority of gross losses likely to be borne by the reinsurance industry, AM Best expects the continued cession of material losses to reinsurers to contribute to further upward pressure on reinsurance rates and a tightening of terms and conditions in upcoming renewals for the country’s direct insurers.
In its Best’s Commentary, “Australia: March Floods Raise General Insurers’ Natural Catastrophe Burden,” AM Best notes that the heavy rainfall and severe flooding that began in mid-to-late March have led to extensive property damage across New South Wales and southeast Queensland. AM Best expects the number of claims received to date to escalate as the event continues to impact the region, and as access to damaged properties is gained over the coming weeks. Losses are likely to emanate primarily from domestic property and motor lines of business, as well as from commercial risks, including business interruption and agriculture covers.
According to the commentary, Australia’s general insurers have exhibited resilience to catastrophe losses over recent years, supported by well-capitalised balance sheets and significant use of reinsurance. This comprehensive use of reinsurance has been a strong contributory factor to the resilient performance of Australia’s general insurers, even in catastrophe-heavy years. Nonetheless, AM Best expects these floods to dampen earnings for fiscal-year 2021, and add to the industry’s recently elevated loss burden from natural catastrophe events.
AM Best will continue to monitor and assess the impact of the current flooding and the higher frequency of natural catastrophe events on the credit fundamentals of individual rated entities.
To access the full copy of this commentary visit http://www3.ambest.com/bestweek/purchase.asp?record_code=307256 .
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.