Australian insurers may increase rates following fire losses: Report

Insured losses from Australia’s brushfires will likely rise further from the $1.1 billion estimated so far by the Insurance Council of Australia, but the country’s insurers are well-placed to pay claims, according to a report Monday from ratings agency A.M. Best & Co.

The losses, however, drive the costs of insurance higher, the report said.

Early reported losses reflect personal lines losses, but commercial losses could swell once finally tallied, Oldwick, New Jersey-based Best said.

The losses are up from those reported only recently by the insurance council.

“It is important to note that this remains an ongoing event, with insured losses expected to rise, not only as policyholders report losses to their insurers and damaged sites become accessible for loss assessment, but also as fires will undoubtedly continue over the coming months,” the report said.

Personal lines insurers have borne the brunt of the claims so far, with more than 2,800 homes reported destroyed.

Commercial lines losses, however, “arising, for example, from farms suffering property, livestock, and business interruption losses,” could climb. “Assessment of these commercial losses, once complete, may drive significant increases in loss totals,” Best said.

Australian insurers should be able to handle the losses, Best said.

“Despite rising loss totals … Australian insurers are well placed to withstand the bushfire losses, aided by strong capital positions and support from reinsurance partners,” Best said.

Looking forward, insurers will likely review how they manage bushfire exposures and that may lead to tighter terms and conditions and price increases for policyholders in loss-affected areas, the report said.