Consumers could bear the brunt of an increase in the sheer magnitude and frequency of extreme weather events due to the impact climate is having on Australian insurers.
A new risk radar report from Sparke Helmore Lawyers has revealed that the Australian insurance market continues to experience extreme volatility driven by an “unprecedented level of natural disasters”.
According to the law firm, “insurers have their backs to the wall” after the recent and catastrophic 2020 bushfire season.
Firm partner Chris Wood has indicated an understanding “that the narrative on climate risk has shifted as boards and insurers are warned of the danger of underestimating the increase in the cost of natural disasters”.
And with increasing losses experienced in recent years due to the sheer magnitude and frequency of extreme weather events and the resultant reduced availability and affordability of insurance, Sparke Helmore has foreshadowed: “There is a real danger that markets will shrink and expose consumers and governments to additional financial burden.”
According to the report, insurers are not having to manage the intersection between policies, risk premiums and price “to strike a balance between the viability of business and societal expectations”.
It comes as technological advancements also threaten to disrupt the insurance industry domestically.
With Australia’s insurance market becoming more competitive and consolidated, the report has stated that insurance bodies’ boards and C-suites need to have enterprise-wide oversight of every current conceivable eventuality and have strategies in place to mitigate and/or respond to risks around privacy, cyber security, regulatory intervention, supply disruption and reputational damage.
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Article reproduced from Nest Egg by Grace Ormsby.
