Cyclone Alfred, set to hit southern Queensland on March 7, could lead to extensive property and casualty claims.
Australia’s leading property and casualty insurers are bracing for a significant financial impact from Tropical Cyclone Alfred, which could result in insured losses exceeding $1.27 billion (A$2 billion), according to S&P Global Ratings.
The cyclone is expected to make landfall along the southern Queensland coast on March 7, an area that is more densely populated and located farther south than typical cyclone paths. The storm’s intensity and trajectory are similar to some of the most severe natural disasters in Australia in the past decade.
Authorities are predicting that strong winds, heavy rainfall, and storm surges will affect a wide stretch of the east coast, from Queensland’s Sunshine Coast to the Northern Rivers region of New South Wales, including Brisbane, home to around 2.5 million people.
The Australian Cyclone Reinsurance Pool (ACRP) will cover initial insured losses after insurers meet their deductibles. Additional extreme losses will be backed by the ACRP’s A$10 billion federal government guarantee.
Craig Bennett, a credit analyst at S&P Global Ratings, noted that Australia’s three largest property and casualty insurers have strong credit quality, with maximum event retentions accounting for roughly 20% of their natural perils allowances. “Capital adequacy is very strong, or better, by our assessments, based on our global insurance capital model,” Bennett said in a statement.
Eligible property claims filed within 48 hours of the event will be covered under the ACRP and the government’s guarantee. Claims for damages beyond this coverage, such as large commercial losses or prolonged flooding, will be handled by primary insurers and their reinsurance programs.
Brisbane City Council has warned that around 20,000 homes could be at risk of flooding due to the cyclone. This is in comparison to the 2022 floods, which resulted in 35,000 homes suffering significant damage and 245,000 total claims, leading to A$6.4 billion (US$4.06 billion) in insured losses.
The last major cyclone, TC Debbie in 2017, caused A$1.8 billion (US$1.14 billion) in claims from approximately 77,000 claims.
Bennett emphasized that a cyclone striking a major city like Brisbane could lead to substantial property damage, insurance claims, and significant business interruption. “Most rated insurers have already enacted emergency disaster management plans,” he added.
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