Australian bushfires, floods — where some Aussies may not be able to insure against disasters by the end of 2030: Climate Council

Powerful Winds Fuel Multiple Fires Across Los Angeles Area

Fires burning across the Pallisades area of Los Angeles and other parts of the city are expected to create a secondary disaster, with many homes unable to be insured.

Australia could be just years away from a California-style natural catastrophe insurance disaster, with 5.6 million homes nationwide believed to have some risk of bushfire.

Climate Council research has revealed the ten electorates most likely to have homes declared uninsurable by 2030, due to the heightened risk of flood or fire wiping residences out.

It comes as the Insurance Council of Australia has revealed that California’s burnt-out homes could impact the cost of underwriting properties across the Lucky Country.

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The ICA have revealed that the global reinsurance industry has “failed to earn their cost of capital” for five of the past six years, resulting in higher insurance costs around the globe — including Australia where there was a 30 per cent hike.

They estimate 5.6 million Aussie homes are at risk of bushfire.

The organisation also notes one in 12 homes, about 1.2 million, have some level of flood risk — with 230,000 facing flooding once every 20 years.

Further analysis by the Climate Council found the Victorian federal electorate of Nichols was the most at risk of homes becoming uninsurable, mostly due to flooding risks, while the wider state is regarded as the nation’s most bushfire prone.

The seat of Nichols was home to more than 71,000 dwellings and 42,000 families at the time of the 2021 Census.

The Los Angeles fires have burned through some of the Los Angeles areas most expensive homes. Picture: David Swanson via Getty Images.

Vast numbers of homes have been destroyed in the fires. (Photo by JUSTIN SULLIVAN / GETTY IMAGES NORTH AMERICA)

The Climate Council research in 2022 found a whopping 25,000 properties in the area would be effectively uninsurable by 2030, mostly as a result of riverine flooding. It accounted for 27.4 per cent of the area’s homes at the time of the research.

However, areas where insurance is not feasible for any reason will also have no coverage in the event of bushfires.

The electorate of Richmond in NSW was next, with one in five properties potentially unable to get insurance by the end of this decade — with 14.5 per cent at risk of rivers breaking their banks, and more than 5 per cent potentially in the path of bushfires.

More than 22,000 properties are at risk in the area.

About 19,550 homes, or 14.8 per cent of all addresses in Maranoa, Queensland, could be uninsurable by 2030.

Vic bushfire risk - for herald sun real estate

Fire maps produced by 360info.org show the risk faced in Australian states. Source: 360info.org

Moncrief in Queensland was next, with more than 18,000 homes, followed by other Sunshine State electorates including Wright, 12,140 properties, Brisbane, 19,355, and Griffith, 14,812.

Indi in Victoria was the nation’s eighth most at risk, with 11,215 properties accounting for 11.3 per cent of the region’s total potentially uninsurable.

The electorate of Page in NSW was ninth, with 11,691 homes potentially to be impacted, followed by Hindmarsh in South Australia where 10,775 addresses that might not be able to be underwritten against natural disasters.

Climate Council of Australia chief executive Amanda McKenzie said the reality was, Australia and much of the world had already reached a California-style crossroads where insurance was no longer feasible in certain areas.

NSW bushfire risk - for herald sun real estate

NSW has many areas of pronounced fire risk. Source: 360info.org

“There are different reasons in California, but in Australia there are a whole range of regions that are becoming more and more uninsurable,” Ms McKenzie said.

Noting that their figures from 2022 were likely to have gotten worse since, the projections of one in 25 properties being uninsurable by the end of the decade could now be worse, with a greater range to high-risk areas and potentially more frequent disasters.

Ms McKenzie said there were added risks for lower socio-economic communities facing bushfires in the future, as a rising number of households could become effectively uninsurable as they couldn’t afford the policies that were being offered — meaning it wouldn’t matter if premiums were high due to flooding, a home destroyed by fire would still be without cover.

Queensland bushfire risk - for herald sun real estate

Queensland’s greatest fire risks are also in some of its most populated areas. Source: 360info.org

“And if you are uninsured, you are uninsured across the board, usually,” she said.

Areas at greater risk of this included parts of Queensland, NSW and Victoria that had been hit with multiple flooding events in the past decade.

The rise of overlapping fire seasons between Australia and the US was also problematic, with the two nations sharing a range of firefighting resources — including aircraft and personnel — but facing a scenario where they might not be able to do so in the future that could make fires more devastating.

Ms McKenzie warned there would also be increased costs for Australian taxpayers as a result of worsening fire seasons at home, with fire service levies likely to rise — and the nation’s wider tax base to potentially pay for wider deployment of the Australian Defence Force to assist in disaster areas.

Tasmania bushfire risk - for herald sun real estate

The vast majority of Tasmania is exposed to very high risk of fire damage. Source: 360info.org

Separate research by Point Data found NSW had 284,452 buildings facing fire danger, including 13,667 in Hawkesbury, 13,342 in Shoalhaven, 11,506 in Tamworth and 10,630 in Quenbeyang-Palerang.

In Victoria the 176,329 buildings at risk cover more than 24,000 in the Yarra Ranges, 11,585 on the Mornington Peninsula, 9520 in the Nillumbik Shire and almost 7800 in Gippsland.

Queensland was the next most at risk, with the municipality of the Sunshine Coast at the top with 24,296 homes at risk, followed by the Gold Coast with 14,335, Mackay at 5,984 and Brisbane with 5851.

The sunshine state had a total of 108,116 homes at risk at the time of the research.

There were 90,000 buildings at risk from bushfire across South Australia, about one in 10 in the ‘high risk’ category. The Adelaide Hills, Kangaroo Island, Mount Barker, Mitcham and Victor Harbor carried the greatest risk.

SA bushfire risk - for herald sun real estate

South Australia is one of the state’s with the least risk from bushfires. Source: 360info.org

Insurance Council of Australia general manager of climate, social policy and international engagement Alix Pearce said they had expected conditions driving Australian insurance bills up to soften this year.

However, Ms Pearce noted that global insurer Swiss Re had estimated a third of the almost $60bn ($37bn US) cost of natural disasters in Australia from 2014-2023 had fallen into a “protection gap”.

Ms Pearce said California’s number of uninsured homes was exacerbated by local regulations that stopped insurers factoring in local risk at homes, leading many providers to refuse to offer protection to homeowners.

However, she noted that with extreme weather events worsening as a result of climate change, there would be ongoing pressure on insurance prices in Australia.

Multiple fire fronts have burned extensive parts of Los Angeles.

Over the past 30 years bushfire losses cost insurers an average of $220m a year.

But that cost surged to $560m in the past five years.

Meanwhile the average cost of flooding has gone from $620m a year to $2.2bn in the same timeline.

Underwriters are now working with Australian communities to make them better able to respond to national disasters to reduce their reliance on insurance.

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