Australia’s insurance sector is recording increasing claims and affordability stress as a result of escalating extreme weather events, with recent disasters costing $2.2 billion in just six months and projections indicating annual losses could reach $8.7 billion by 2050, according to a new government report.
The Home Safe: National Leadership in Adapting to a Changing Climate report, released by the Climate Change Authority (CCA), attributes the rise in damages to the increasing frequency and severity of natural disasters. These include cyclones, bushfires, droughts and floods, which are now affecting areas previously not considered at risk.
Estimates from the Insurance Council of Australia (ICA) show that natural disasters cost Australian homeowners around $4 billion each year. This figure covers both insured and uninsured losses, as well as related impacts such as mental health issues, displacement, and loss of employment or housing.
Matt Kean, chair of the CCA, said that millions of homes are now exposed to growing climate risks. He described homes as a major financial commitment for Australians and referred to the recent flooding on the New South Wales mid-north coast as one instance of continuing exposure.
Research cited in the report from ICA, Treasury, and The McKell Institute places the annual cost of residential building damage at $2 billion for cyclones, $1.5 billion for floods, and $486 million for bushfires. The CCA also reviewed claims data from the Actuaries Institute and ICA, which showed that insurance claims following ex-Tropical Cyclone Alfred and the North Queensland floods exceeded $1.2 billion.
Affordability concerns are growing, with 15% of Australian households experiencing home insurance stress in 2024. Rising premiums and reduced insurability in high-risk areas are contributing to financial strain for property owners.
The report also noted that climate change may impact long-term property values, projecting a potential $500 billion reduction in the national property market by 2030. In addition to physical damage, Australians face disruptions to health, education, and work.
The CCA recommended investment in infrastructure, regulatory updates, and increased access to information to support risk management. CSIRO research found that every $1 spent on adaptation or risk reduction may save $2 to $11 in recovery.
Government efforts include the National Climate Risk Assessment, the forthcoming National Adaptation Plan, and funding programmes such as the Disaster Ready Fund and Critical Infrastructure Resilience Strategy.
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