Catastrophic LA fires may have costly sting for Australians

Source: X/Rizwan Haider
The effect of the catastrophic fires in Los Angeles is likely to be felt in the hip pocket of Australians’ as a growing list of climate disasters drives up insurance premiums.
Natural disasters have fuelled Australians’ insurance costs beyond inflation, analysis from The Australia Institute has shown.
Even events on the other side of the world, such as the raging Los Angeles fires, can still affect Australia – as the factors that increase the frequency and scale of natural disasters globally will also do so within Australia.
The Australia Institute senior research fellow David Richardson said the effect had left disaster-prone regions of Australia almost uninsurable as coverage became unaffordable.
“People may not realise that events like California’s wildfires increase the likelihood of further increases in insurance premiums,” he said on Tuesday.
“The increasing number, scale and intensity of natural disasters like bushfires, cyclones and floods – due to our changing climate – is a global phenomenon which will impact insurance premiums around the world, including here in Australia.
“The LA fires are a tragedy which will have global consequences for years to come.”
Global ratings agency Moody’s has found that global insured losses from natural disasters have averaged about $A162 billion in the past five years. FitchRatings reports that insured natural catastrophe costs were “47 per cent above the 20-year average” in the first half of 2023.
California Governor Gavin Newsom has said the still-burning firestorm could rank as the most devastating natural disaster in US history.
Entire neighbourhoods have been levelled, leaving smouldering ash and rubble. In many homes only a chimney is left standing.
“It’s one thing to see it on television. It’s another thing to see it from the air. The massive, massive destruction is unimaginable until you actually see it,” Los Angeles Mayor Karen Bass said after an aerial tour.
It is already the costliest wildfire event in terms of insured losses, with private forecaster AccuWeather estimating the damage and economic loss at $US135 billion ($220 billion) to $US150 billion ($244 billion).

Damage in Florida’s Fort Myers Beach after Hurricane Ian. Photo: Getty
Insuring the insurers
The reinsurance market – where insurance companies buy insurance from bigger, international organisations to mitigate their own losses from natural disasters – also has a role in surging bills.
Hurricane Ian, which ripped through Florida in 2022, made 2023 the third-costliest hurricane season on record. In turn, that added to global pressures in the reinsurance sector.
“It’s difficult to put a dollar figure on it for Australian consumers but, as the world’s big reinsurers push up premiums to cover their losses from natural disasters, local insurance companies will be forced to do the same,” Richardson said.
“The soaring cost of insurance has left many Australians unable to afford to insure their homes and belongings. If prices rise even further, more people will be forced out.”
The Los Angeles fires have killed at least 24 people and left thousands more displaced under evacuation orders.
Sewerage, water and power infrastructure has been significantly damaged and more than 12,000 structures have been destroyed.
On Wednesday (Australian time), 8500 firefighters from at least seven US states, Canada and Mexico managed to gain slightly more control on the perimeter of the blazes, which have consumed an area the size of Washington, DC.
The cause of the fires remains unknown.
-with AAP