08 February 2011

Australians Likely To Have To Pay Higher Home Insurance Premiums

Australians Likely To Have To Pay Higher Home Insurance Premiums ; Australians are likely to have to pay higher home insurance premiums as insurers seek to recoup some of the $1.6 billion in claims they will have to pay out as a result of the flooding in Queensland and cyclone Yasi warns QBE Insurance chief executive Frank O’Halloran.

Australian insurers face further pricing pressure as global re-insurers demand higher premiums for substantially increasing their exposure to the risk of Australian natural disasters.

”What you’ll see in Australia is a move in property rates – that’s for sure – on the back of what’s happened/ I have no doubt in my mind you’ll see significant increases in the costs of re-insurance in Australia,” Mr. O’Halloran told a market briefing.

Many analysts expect that premiums in 2011 will likely track the rises of the last two years, which rose 11 and 10 per cent respectively.

”One would expect that after a couple of severe weather events in a short period of time it’s more likely that the overall average increase in household insurance premiums will be more than the 8 per cent predicted [for 2011],” said Elaine Collins, leader of the general insurance actuarial team at Deloitte.

QBE derives most of its earnings from international operations, but still expects a claims bill from the Queensland flooding of at least $145 million.

A ”very preliminary estimate” of claims for damages caused by cyclone Yasi is around $100 million, Mr O’Halloran said. ”I think the industry dodged a bullet – and so did the rest of Queensland – which is a very pleasing thing to happen.”

Australia’s largest insurer Insurance Australia Group (IAG) estimates its bill from the flooding and cyclone to be in the $100 to $130 million range, whilst its exposure to flooding in Victoria is estimated to be between $25 to $40 million.

The Reserve Bank of Australia says that the insurance industry in Australia will easily be able to cope with large rises in claims, and that it is well capitalized with insurers holding double the minimum regulatory capital.

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