Journal - Allianz

Australia
Allianz Group Journal 2/2013
Elephants in the outback
Shutterstock
This year, Australia experienced one
of its hottest summers in a decade
with record temperatures of nearly
50°C in places. The heat wave was
barely over when Tropical Storm
Oswald caused major flooding in parts
of Queensland. The insurance industry
got off relatively lightly.
FRANK STERN
Talk about good timing: in January, a man in Tasmania
rang Allianz Australia and took out a home insurance
policy just as a bush fire was threatening to engulf his
property. The embargo by which the insurer usually
prevents policies from being taken out in the face of
imminent danger was not yet in place. Shortly afterwards
the man’s house went up in flames. No doubt
he was one of Allianz’s satisfied customers.
Nicholas Scofield, Allianz Australia’s spokesman, remembers
this episode quite vividly. Not everyone is that lucky
in a disaster. The bushfire, which raged through New
South Wales, Victoria and Tasmania in January, caused
less damage though than the dramatic images on TV
might have indicated. Most people and their property
were not at risk, says Scofield. “The fires were mainly
limited to forests and uninhabited areas.”
That was not the case four years ago when numerous
houses were destroyed by bushfires in Victoria. “Back
then losses for the Australian insurer totaled over one
billion Australian dollars,” recalls Jenny Lambert, general
manager of Claims Services at Allianz Australia. This year,
according to the Insurance Council of Australia, only
AUD 120 million (EUR 97 million) was paid out, most of
it – just under AUD 90 million – in Tasmania. Allianz had
to stump up for 72 cases with total insured losses of
about AUD 6 million (nearly EUR 5 million).
Cyclone Oswald in January this year was another story.
It brought with it such heavy rain that streams in
Queensland and New South Wales swelled to fast-flowing
rivers, which broke over dams and flooded numerous
settlements. Insured losses alone amounted to almost
AUD 850 million (EUR 675 million), AUD 68 million
(EUR 54 million) of which have been paid out by Allianz.
Of all the natural events in Australia, flooding has the
greatest damage potential, ahead of hailstorms and
tropical storms. According to the Insurance Council of
Australia, flooding has caused AUD 4.5 billion of damage
in the past decade. When large parts of Queensland
were deluged by a hundred-year flood in 2011 (insured
losses: AUD 2.4 billion), many insurance companies,
including Allianz, placed a temporary embargo on
new business in the worst-affected storm zones.
Pulling the plug
Last year, Queensland’s biggest insurer Suncorp also
pulled the plug and announced that it was no longer
issuing any new home insurance policies in the towns
of Emerald and Roma, which are regularly under water.
And premiums for existing policies were immediately
increased by as much as tenfold. In two years the company
had paid out AUD 150 million in flood claims in the
two small towns – compared with a premium income
of just AUD 4 million.
The insurance industry had been calling on the state
for years to provide more funding for dikes and dams
to protect property. But their pleas fell on deaf ears.
However, following the severe flood damage in January
this year, the government in Canberra reacted. In the
next two years, AUD 100 million will be invested in flood
mitigation projects – a measure which, according to Rob
Whelan, CEO of the Insurance Council of Australia, will
have a palpable effect on insurance premiums.
That remains to be seen. The penchant of Australians
to settle in high-risk areas might undermine that hope:
90 percent of the population live along the coast. Waterfront
properties in New South Wales and Queensland
are particularly popular. “Despite the known risks, more
and more people are building homes there, where tropical
storms rage on a regular basis,” says Jenny Lambert.
Of course, when a tropical storm rips the roof off your
house, a dike isn’t going to be of much use.
Local councils in the affected areas haven’t been particularly
helpful either in terms of active defense measures,
reports Bob Gelling, Claims manager at Allianz Australia
in Brisbane. “Settlements have been built next to rivers
and in depressions,” says Gelling. “Of course they will
all be under water when the next hundred-year storm
strikes.” And living areas of many of the typical Queens-
40
41