Home owners and property investors will not only be forced to budget for a potential rate rise later this year, but also a hike in insurance premiums as the Queensland and Victorian floods and Cyclone Yasi put a significant dent in insurers coffers.
A Sydney Morning Herald article reveals that more than $1.6 billion in payouts to Queenslanders will have to be recouped according to one of the nation’s top insurance executives.
Chief executive of QBE Insurance Frank O’Halloran said, ”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,” he told a market briefing.
Analysts said any increases in home insurance premiums were likely to track increases of each of the past two years, which were 11% and 10% respectively.
Leader of the general insurance actuarial team at Deloitte Elaine Collins said, ”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].”
O’Halloran says the preliminary estimates of the damage bill for Cyclone Yasi is around $100 million, while QBE expects a damages bill from the flooding across Australia to come in at $145 million.
Insurance Australia Group, the nation’s biggest insurer, said natural peril claim costs from the storms and floods in south-east Queensland and northern NSW are expected to range between $110 million and $130 million, while payouts from the floods in Victoria are expected to range between $25 million and $40 million.
The Reserve Bank noted yesterday that Australia’s insurance industry is well placed to cope with a large increase in claims expenses, saying insurers were well capitalised with the industry holding about double the minimum regulatory capital.
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