Australian bushfires worry insurers less than cyclones and floods

Peter Hannam in the Sydney Morning Herald (Australia): With large parts of the country under threat during this bushfire season, it seems counter-intuitive - if not insensitive - to downplay the economic risks. With both Victoria and New South Wales declaring total fire bans and with bushfire researchers warning the danger period has barely begun, moves to minimise potential losses might also seem premature.

Still, while the costs of the latest fires are not trivial - 525 claims for $52.5 million for the Tasmanian fires alone - the reality is only a fraction of a typical premium reflecting bushfire risk, according to Karl Sullivan, the general manager policy risk and disaster planning at the Insurance Council of Australia. ''[It's] in the vicinity of less than 2 per cent,'' Sullivan says. ''Internal fires from kitchen fires and things like that rate higher.''

The insurance industry does not dismiss the human and financial costs from bushfires. Victoria's 2009 Black Saturday bushfires killed 173 people and destroyed more than 2000 homes. A report issued this week by Suncorp, one of the country's biggest insurers, noted the blazes cost at least $4 billion. Of that, the federal government spent $468 million on relief and disaster recovery, the state government $269 million and the insurance industry $1.07 billion.

But for the industry, bushfires are another of the major hazards facing Australians and less of a worry to insurers than tropical cyclones and floods. The reinsurance giant Munich Re says research shows Australia is more exposed than other regions to climate change but fire is not the foremost hazard, according to Ernst Rauch, head of the company's corporate climate centre.

Longer term, ''water and precipitation are probably the most significant issues related to climate change, in both directions'', he says....

Bushfire smoke over Melbourne in 2009, shot by Nick carson, Wikimedia Commons, under the Creative Commons Attribution 3.0 Unported license