Insurers weather storms with higher premiums
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The Queensland storm bill is climbing into the hundreds of millions of dollars. (ABC Online: Ben Atherton)
As Brisbane residents call on their insurance companies for help, the insurance sector has revealed that it was well prepared to deal with the disaster.
Some insurers say they have been increasing their reserves to deal with the expected increased frequency and severity of storms, but that has led to a rise in premiums.
So far this year 400 storms have caused more than $US60 billion in damage across the globe.
In Australia insurers also had a tough last financial year and they say large losses from storms are now a fact of life.
The head of insurance practice at KPMG, Brian Greig, says the higher risk means one thing - higher premiums for consumers.
"Certainly the weather events that have occurred on several nights earlier this week are evidence that we will see more of these events," he said.
"We're going to see them in areas where unfortunately there's a significant build-up in the population and asset values that are exposed to these events.
"So I would be suggesting that yes, rates would be increased to continue to reflect the increased risks that exist for insurers in insuring people in areas that are more exposed to such events."
The impact of global warming remains a topic of debate, but Mr Greig says there is compelling evidence that climate change is increasing risks for insurers.
"People like Swiss Re and Munich Re have been doing research in terms of the impacts of climate change on weather events for in excess of 30 years," he said.
"It's not a new phenomenon for them at all and they continue to point to increased frequency and severity of events.
"Of course the re-insurers work very closely with the insurers, so insurers are well aware that there are certainly impacts related to climate change in terms of these weather events."
Building standards
The industry in Australia says all tiers of government need to look closely at the impact of climate change and what it means for regulation.
Paul Giles from the Insurance Council of Australia says individuals also need to do more to protect themselves against changing weather patterns.
"If you're living in a high-risk area, if you're living along the coastal fringes, if you're living in the tropics where you get cyclones, the building codes need to be up to a certain standard to recognise that buildings need to be built in a certain way to withstand the individual weather circumstances," he said.
"So a building in Sydney may have different requirements to a building in Melbourne, for example."
He says some companies adjust their premiums according to the building standards in place for the insured structures.
But this goes to the heart of whether there is an incentive for builders to spend the money to come up to a certain standard.
"There's an incentive but of course if you've got a building in a poor condition that's built in a cyclone area that's not up to the standard building codes, well, the premium for that building of course is probably more expensive, if you can get a premium for it at all," Mr Giles said.
"The real key thing here is that the industry is saying that governments, both state and federal, need to recognise that buildings need to be up to a certain standard.
"Now that may indeed have an additional cost for the building sector. But when they go to look at insurance, if that insurance industry assesses the building as being at high risk of not being able to withstand the environment in which it's built, you may not actually be able to get insurance for it."
Based on a Richard Lindell report for The World Today on November 21.
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