Iuliia Shustikova, product manager at Moody’s, says the early‑2026 bushfire season in Australia is demonstrating how quickly climate and weather conditions can translate into substantial insured losses when large fires move into populated and agricultural areas. Her analysis highlights bushfire as a continuing, complex natural peril for Australian insurers and reinsurers, shaped by hazard, exposure patterns, and the interaction of multiple perils in short timeframes.
In a recent analysis, Shustikova noted that Australia entered 2026 facing a “serious bushfire crisis” as extreme conditions that developed in December carried into January across southeastern states. Prolonged heat and dry conditions have contributed to one of the most challenging seasons since the 2019–20 Black Summer in terms of where fires are burning and the assets they are affecting, rather than area burned alone.
Victoria has been the focus of current activity. More than 400,000 hectares of bushland and farmland have been burned, an area estimated to be more than five times the size of Singapore. As of Jan. 13, authorities reported 12 major fires still active and around 30 fires in total across the state. Key firegrounds include:
A State of Disaster has been declared for 18 local government areas in Victoria after days of temperatures above 40 degrees Celsius, strong winds with gusts up to 100 kilometres per hour, and a heatwave extending into its second month across southern Australia. Victoria Premier Jacinta Allan said fire conditions would remain an issue. “We will see fires continue for some time across the state, and that is why we are not through the worst of this by a long way,” Allan said.
At the time Moody’s prepared its analysis, more than 700 structures had been reported damaged or destroyed. Agricultural losses include an estimated 20,000 livestock, while power outages have affected thousands of homes and businesses. Fire danger ratings have reached extreme and catastrophic levels, with 26 official warnings issued in Victoria and very high fire danger also reported in parts of New South Wales. Shustikova points to the location of this season’s fires as a key factor for insurers, noting that what stands out in 2026 is “how multiple large fires, aligned with extreme conditions, have crossed into areas with property exposure,” placing homes and businesses directly in the path of fire fronts and lifting both insured and humanitarian impacts.
For the insurance market, the event escalated on Jan. 16 when the Insurance Council of Australia (ICA) upgraded its earlier significant event declaration for the Victorian fires to an Insurance Catastrophe. The declaration covers the 18 affected LGAs and activates additional industry‑wide claims and customer‑support measures. Since Jan. 7, insurers have received 2,369 claims linked to the fires across home, commercial property, and motor lines. The ICA has indicated that around 30% of all property claims are currently assessed as total losses. That ratio is being closely tracked by insurers, reinsurers, and catastrophe teams as loss estimates develop and as access improves in affected communities.
The ICA expects commercial claims to increase as businesses gain access and are able to assess damage to premises, stock, and equipment. Additional claims are anticipated as more policyholders return to their homes and businesses and confirm the extent of the damage. Under the catastrophe declaration, insurers are prioritising claims from affected customers, triaging to direct urgent assistance to those most heavily impacted, and deploying disaster response staff when emergency services say it is safe to do so. The ICA has formed an industry taskforce to identify operational and systemic issues arising from the event, including any matters that may require coordination with governments or regulators.
Insurers are maintaining a presence at the Castlemaine Recovery Centre, while on‑the‑ground support continues in Natimuk and Skipton. The ICA is monitoring access into Longwood and surrounding communities such as Harcourt with a view to extending support as conditions allow. “These bushfires have been devastating for many communities across Victoria, and insurers’ priority is getting help to people as quickly as possible. We acknowledge that a large recovery effort will be required to help the state recover from this catastrophic event, and insurers stand ready to support communities in this process,” said ICA deputy CEO Kylie Macfarlane.
Shustikova sets the 2026 fires against the benchmark of the 2019–20 Black Summer bushfires, which burned more than 10 million hectares in New South Wales and over 1.5 million hectares in Victoria, destroyed thousands of homes and critical infrastructure and led to extensive ecological and social impacts. She argues that, for insurers, the key insight from Black Summer and 2026 is the alignment of several drivers rather than any single metric. In both periods, extreme heat, strong winds, and dry fuels produced volatile fire behaviour. The current season illustrates how prolonged rainfall deficits, persistent heatwaves, wind conditions, and multiple ignitions can occur at the same time, placing pressure on firefighting resources and evacuation systems. Shustikova notes that these conditions can develop even outside the most severe drought years, indicating that historical drought episodes are not the only reference point for understanding future bushfire seasons. This has implications for catastrophe models, which may need to account for a wider range of compound scenarios and exposure patterns in rural and peri‑urban areas.
The Victorian situation has also highlighted the interaction between bushfire and other hazards. On Jan. 15, a storm system delivered 166 millimetres of rain in the Mount Cowley area on Victoria’s southwest coast. Sections of the Great Ocean Road, which had already been affected by earlier fire‑related closures, experienced flash flooding, with people trapped in vehicles and nearby caravan parks inundated. Forecast storms are expected to bring further rainfall, providing some relief in certain firegrounds but also increasing the risk of flash floods and landslides. For insurers and reinsurers, the rapid shift from bushfire to storm and flood in the same regions underlines the potential for multi‑peril accumulation. Claims may arise concurrently under home and contents, motor, business interruption, and additional living expenses covers, adding complexity to claims handling, reserving and reinsurance recoveries.
Moody’s also compares the Australian experience with the January 2025 firestorm in the Los Angeles area, where extreme winds, dry vegetation, and peri‑urban expansion led to urban‑area losses during the Northern Hemisphere winter. One year after the Eaton and Palisades fires, fewer than 10% of affected homes have been rebuilt, and extended additional living expenses and business interruption payments have contributed to long recovery timelines.
According to Moody’s, events in Australia and overseas are prompting a wider reassessment of wildfire risk. Risk is increasingly being considered in terms of how hazards intersect with the built environment and infrastructure, rather than only by distance to vegetation or past burn footprints. The analysis notes that Australian cities and urban fringes may be exposed to similar dynamics if extreme conditions coincide with ignition near populated areas.
Shustikova describes bushfire as a major natural peril for Australian insurers and reinsurers that requires ongoing reassessment as climate variability, land use and settlement patterns evolve. She suggests that the 2026 Victorian fires and related events are likely to inform pricing, capital management, reinsurance purchasing, and exposure controls, as well as engagement with mitigation efforts, land‑use planning, and building standards. Recent seasons in Australia and other markets, she adds, underscore the importance for the industry of clear risk assumptions, detailed exposure data, and continual updates to tools used to assess bushfire risk under current climate conditions rather than solely on historical experience.
