Aussie homeowners could face an insurance crisis following the Los Angeles fires
Australians may have to pay more for their home insurance as catastrophic fires in the US add to a growing list of climate disasters that are driving up premiums.
Natural disasters have pushed Australians’ insurance costs above inflation, an analysis by the Australia Institute has found.
Even events on the other side of the world, such as the Los Angeles fires, can still impact Australia, as the factors that increase the frequency and magnitude of natural disasters globally will also do so within Australia.
This has left disaster-prone regions of Australia virtually uninsurable as cover becomes unaffordable, said David Richardson, senior researcher at the Australia Institute.
“The increasing number, scale and intensity of natural disasters such as bushfires, cyclones and floods – due to our changing climate – is a global phenomenon that will impact insurance premiums around the world, including here in Australia,” he said.
“The LA fires are a tragedy that will have global consequences for years to come.”
The reinsurance market – where insurance companies buy insurance from larger, international organizations to limit their own losses from natural disasters – also plays a role.
Hurricane Ian, which tore through Florida in 2022, made 2023 the third-costliest hurricane season on record, adding to global pressure on the reinsurance industry.
Natural disasters such as wildfires and floods have pushed insurance costs above inflation
California’s wildfires will impact insurance premiums around the world
“As the world’s major reinsurers increase premiums to cover their losses from natural disasters, local insurance companies will be forced to do the same,” Richardson said.
The fires in Los Angeles have killed at least 24 people and forced thousands of others to flee due to evacuation orders.
Sewerage, water and energy infrastructure has been significantly damaged and more than 12,000 structures have been destroyed.
The cause of the fire is still unknown and while government agencies have not yet provided damage estimates, the event could be one of the country’s costliest natural disasters.