Australia’s insurance industry is monitoring the potential return of El Niño conditions later this year, as climate indicators point to a possible shift in the Pacific that may influence heat, drought, and bushfire risk. The developing outlook comes alongside higher catastrophe losses in 2025 and ongoing concerns about the affordability of cover for households.
Forecasters report that after three consecutive La Niña years, which were associated with generally wetter conditions, the Pacific Ocean has moved into a cooling, neutral phase. This is creating conditions in which El Niño could redevelop during the transition period from mid to late June. El Niño is a recurring climate pattern in which sea surface temperatures along the equatorial Pacific rise above average, altering atmospheric circulation and changing rainfall and temperature patterns in many regions. In Australia, previous El Niño events have often been linked to reduced rainfall and higher bushfire danger, particularly in eastern and southern states.
Meteorologist and academic Dr Milton Speer said the reorganisation of warm water across the Pacific is central to the process. “When an El Niño develops, the warmed water tends to shift towards the central eastern Pacific. Around Australia’s east and north, sea temperatures tend to be cooler than average, and that usually means less rainfall, particularly from spring into summer,” Speer said, as reported by News.com.au. He noted that the 2023 El Niño did not follow earlier historical patterns, with heavy rainfall and flooding still recorded in parts of eastern and northern Australia. He said global warming has “upset the regular change and impacts of the phases,” complicating the use of past events as a guide for future seasonal risk. For insurers and reinsurers, the prospect of El Niño returning raises questions about exposure to bushfire and heat-related losses, possible impacts on agriculture and water resources, and indirect effects on health, business interruption, and infrastructure.
Recent loss data provides additional context for these climate signals. Figures from the Insurance Council of Australia (ICA) indicate that extreme weather events in 2025 generated almost $3.5 billion in insured losses from around 264,000 claims, driven by flooding, severe storms, and hail. The ICA classified five events during 2025 as significant or catastrophic. The North Queensland floods from late January to mid-February were followed by Ex-Tropical Cyclone Alfred, which affected Queensland and northern New South Wales from late February to mid-March. In May, floods on the Mid North Coast and in the Hunter region added further property and business losses.
Spring brought increased storm activity. Severe Spring Storms affecting South-East Queensland and northern NSW from Oct. 26 to Nov. 2 resulted in 35,500 claims and $601 million in insured losses. A second period of severe storms and hail across Queensland and NSW from Nov. 20 to 27 led to 70,200 claims and $814 million in insured losses. Together, these two spring storm periods accounted for about $1.4 billion of the year’s total losses. Ex-Tropical Cyclone Alfred was the costliest single event, with around 132,000 claims and more than $1.5 billion in insured losses.
The ICA’s aggregate figures exclude several smaller but locally intense events, including flooding in Western Queensland, storms in Casterton and Harden, and bushfires in Halls Gap. Insurers expect claims from both large and smaller events to continue developing, suggesting the final cost of 2025 extreme weather is likely to exceed the current $3.49 billion estimate. By comparison, insured losses from extreme weather totalled $581 million in 2024 and $2.35 billion in 2023, illustrating the variability of catastrophe outcomes over short time frames and the need for multi-year perspectives in pricing, capital management, and reinsurance planning.
At the household level, survey data indicates that climate- and weather-related risks are increasingly linked with concerns about the cost and availability of home insurance. A YouGov poll commissioned by the Climate Council, involving more than 1,500 Australians, found that 54% of respondents with home and/or contents insurance are worried that extreme weather such as bushfires, floods, or storms will make cover unaffordable or unavailable where they live. Almost half (46%) said they have already experienced premium increases they attribute to extreme weather. One in five (22%) people with home and/or contents insurance reported that they are likely to consider going without cover if premium pressures linked to worsening extreme weather continue. As of 2023, an estimated 5.1% of Australian households were underinsured and 3.3% were uninsured, representing more than two million people without full protection against property risks.
Climate Councillor and economist Nicki Hutley said many Australians are experiencing both higher climate-related risk and higher insurance costs. “An ever-growing number of Australians are finding themselves caught between an insurance rock and a climate hard place. Families know their homes face greater risk from climate-fuelled disasters, and those same risks are helping drive insurance costs – and insurance itself – out of reach as more Australians struggle to pay their premiums. It’s a blunt reminder that climate pollution is already costing us – as more disasters anywhere, drive up costs everywhere – and those costs are growing,” Hutley said.
Climate Councillor and infrastructure expert Janice Lee pointed to recent seasons as another illustration of how climate extremes are affecting housing and budgets. “Unfortunately, this summer is another reminder that more and more often we’re seeing wild and unpredictable weather that burns and floods houses. The costs of these events, driven by climate change, hurt families, impact the value of homes, and create additional cost of living pressure. In 2025, Australians paid up to $700 more for home and contents insurance premiums than in 2024. Either we invest early to avoid climate change tipping points, or we pay for constant repair and adaptation, with ordinary Australians footing the bill,” Lee said.
