In recent years, insurance costs facing Australian households have surged much faster than inflation, driven by a string of natural disasters, like the 2022 floods in northern New South Wales.
Natural disasters are leaving vulnerable areas virtually uninsurable - or making insurance coverage unaffordable.
Global ratings agency, Moody's, has found that global insured losses from natural disasters have averaged about US $100 billion over the past five years. FitchRatings reports that insured natural catastrophe costs were "47% above the 20-year average" in the first half of 2023.
The Insurance Council of Australia's Catastrophe Resilience Report 2022-23 concludes that "global events have cost impacts in Australia, too. The impact of Hurricane Ian in Florida made last year the third-costliest hurricane season on record, contributing to global pressures in the reinsurance market."
The reinsurance market is the process through which insurance companies buy insurance from bigger, global companies to limit their own losses in the event of a major natural disaster.
"People may not realise that events like California's wildfires increase the likelihood of further increases in insurance premiums," said David Richardson, Senior Research Fellow at The Australia Institute.
"The increasing number, scale and intensity of natural disasters like bushfires, cyclones and floods – due to our changing climate – is a global phenomenon which will impact insurance premiums around the world, including here in Australia.
"It is the same global factors which increase the frequency and scale of events like the LA wildfires and also increase the frequency and severity of climate-related disasters in Australia.
"It's difficult to put a dollar figure on it for Australian consumers but, as the world's big reinsurers push up premiums to cover their losses from natural disasters, local insurance companies will be forced to do the same.
"The soaring cost of insurance has left many Australians unable to afford to insure their homes and belongings. If prices rise even further, more people will be forced out.
"The LA fires are a tragedy which will have global consequences for years to come."
