Prolonged heat across southern Australia is increasing attention on bushfire risk, catastrophe losses, and insurance affordability, as Victoria faces several days of extreme temperatures on top of an already active fire season. The Bureau of Meteorology (BoM) has advised that a “dome of heat” moving from Western Australia across the continent will push temperatures towards record levels in parts of South Australia, Victoria, and New South Wales. From Jan. 24, inland areas are expected to record at least five consecutive days above 40C, particularly along the Murray River and across central and northern Victoria. Forecasts indicate Adelaide may reach around 42C, with Port Augusta projected to reach about 46C. Melbourne is expected to climb to about 40C, ease briefly, then rise again to around 41C early next week, while locations such as Ouyen near Mildura are forecast to approach 48C.
According to The Guardian’s report, BoM senior meteorologist Kevin Parkyn said: “Many centres are probably going to approach their all-time maximum records. This is quite a significant day on Tuesday,” referring to the likely peak of the heat event. He added that inland districts could experience “four, five, six, seven days of 40-plus-degree temperatures inland, particularly hanging in there along the Murray,” with no meaningful rainfall indicated in outlooks for the next fortnight. Fire weather conditions are expected to deteriorate across multiple regions. Extreme fire danger has been indicated for south‑west Victoria and the Wimmera, with catastrophic fire danger forecast for South Australia’s Yorke Peninsula and extreme ratings across much of the state’s southern districts and the Mount Lofty Ranges. On Jan. 25, heightened fire danger is expected to extend into southern NSW and the ACT.
The latest heat across the south and east follows record and near‑record temperatures in Western Australia earlier in the week. Locations between Kalbarri and Carnarvon recorded maximums in the high 40s, including Shark Bay at 49.2C and Gascoyne Junction at 48.9C. Carnarvon airport, which has records dating back to the 1880s, reported 47.9C, its highest January temperature. At the same time, a tropical low north‑west of Broome is under a cyclone watch, with a high probability of developing into Tropical Cyclone Luana as it tracks towards the Kimberley coast. For insurers, the combination of extreme inland heat, elevated bushfire danger, and a tropical system approaching the northwest coast is increasing attention to accumulation management across heat, bushfire, storm, and cyclone exposures.
The BoM has reported that 2025 was Australia’s fourth‑warmest year on record, with national average temperatures 1.23C above the long‑term mean. Hotter‑than‑usual days and nights are projected to continue across much of the country until at least April, supported by warmer‑than‑average sea surface temperatures around Australia and in other ocean basins. For underwriters and reinsurers, this backdrop points to continued elevated weather‑related volatility through the current policy year.
In Victoria, the heatwave is occurring alongside a significant bushfire outbreak. Seven major fires remain active, with incidents at Walwa, the Wonnangatta Complex near Dargo, and Mallacoota yet to be brought under control. The Longwood fire in central Victoria is now contained but has destroyed 320 homes and burned about 144,000 hectares since it started on Jan. 9. The Insurance Council of Australia (ICA) has escalated its earlier significant event declaration for the Victorian fires to an Insurance Catastrophe, covering fires affecting 18 local government areas since Jan. 7. The change activates standard catastrophe‑level claims and customer support arrangements across participating insurers and sets the framework for aggregating and reporting losses from the event.
Under the catastrophe declaration, insurers are prioritising claims from affected policyholders, triaging files to focus on the most severely impacted customers, and deploying disaster response staff and ICA representatives to recovery centres when emergency authorities consider access to be safe. The ICA reports that more than 2,600 claims have been lodged from the Victorian bushfires, with close to half relating to commercial risks, including agricultural enterprises. Once the Victorian losses are fully developed, the council expects claims from declared weather catastrophes since September to exceed $2 billion nationally. Country Fire Authority chief officer Jason Heffernan has cautioned that existing fires may continue to expand under the forecast conditions. He said that even without the high winds recorded earlier in the season, “the sheer heat and the topography of the landscape” meant fires could “spread rather rapidly,” resulting in “quite volatile fire behaviour.”
Rising catastrophe losses are adding to pre‑existing pricing and capital pressures in personal lines. ICA director of mitigation and extreme weather response Liam Walter said premiums do not generally move in response to a single event in isolation, but aggregate catastrophe experience remains a central input to rate setting and capital planning. “Those are significant figures and insurers do need to account for that in their pricing, ultimately,” Walter said, referring to the recent series of declared catastrophes.
Walter also said the ICA is not presently observing widespread withdrawal of capacity from bushfire‑exposed regions. “I think I can comfortably say there’s not going to be a disappearance of insurance all of a sudden, but [I would] absolutely recommend anyone that’s looking for insurance does shop around to find the best deal,” he said, as reported by ABC. In regional high‑risk areas, including parts of central Victoria such as Harcourt, insurers and intermediaries report a growing difference between households and businesses that can maintain coverage and those responding to affordability pressures by reducing sums insured, increasing excesses or cancelling policies. For personal lines portfolios, this trend has implications for risk selection, retention, and exposure management in higher‑hazard locations.
Equity analysts following listed insurers expect the latest Victorian fires, ex‑Tropical Cyclone Koji in Queensland and a sequence of severe storm events in several states to support further upward pressure on personal lines pricing. In a client note reported by The Australian, Morgan Stanley analyst Richard Wiles said the latest extreme weather is likely to affect first‑half earnings and “drive elevated pricing for new insurance policies and renewals,” identifying motor claims inflation as a key factor. Morgan Stanley estimates that motor premiums across the market have risen by about 10% over the past 12 months, while home insurance premiums have increased by around 3% after earlier repricing. For new motor business, the bank cites IAG and Allianz as among the more active in lifting rates, with Suncorp reducing pricing in some segments. In home and contents, IAG is reported to be moderating rate increases, while Suncorp has implemented some of the larger adjustments.
The Victorian bushfires and broader heat event are contributing to national discussion about how to balance risk‑based pricing, affordability, and the long‑term viability of communities in high‑hazard regions. The ICA is advocating for increased public investment in mitigation and resilience measures, including fuel management, forestry practices, and infrastructure and land‑use initiatives designed to reduce loss frequency and severity and, over time, ease pressure on premiums.
Following the 2019–20 Black Summer fires, a Senate committee recommended that the treasurer direct the Australian Competition and Consumer Commission (ACCC) to undertake an inquiry into the supply of insurance in bushfire‑prone regions, covering pricing, availability, and profitability in the context of climate risk and potential product or policy innovation. The federal government noted that recommendation in April 2024 but has not yet requested that the ACCC commence the inquiry.
Federal Minister for Emergency Management Kristy McBain has acknowledged that insurance costs can be “challenging” and said the government will continue to work with the insurance sector, state and territory governments, industry stakeholders, and communities on long‑term risk‑reduction initiatives. She said the government is collaborating with insurers “to identify mitigation measures that can put downward pressure on insurance premiums in high-risk areas.” For insurers, reinsurers, and intermediaries, the current combination of heatwave conditions, bushfire activity, and broader severe weather is keeping catastrophe modelling, accumulation management, and mitigation incentives central to portfolio and capital decisions, while affordability and access to cover in higher‑risk regions remain key considerations for regulators and communities.
