This week, the Insurance Council of Australia (ICA) released data showing that 2025’s insured losses have reached $1.5 billion, mainly driven by flooding. An increasing number of commercial properties with broker organised covers are facing flood risks – particularly tourism assets. However, despite being the country’s most costly natural disaster, industry stakeholders say flood resilience efforts lag behind initiatives to reduce cyclone and bushfire impacts.
“We've got much stronger building standards and great technology now that is being rolled out in our building sector that can really strengthen homes against up to Category 5 cyclones,” said ICA CEO Andrew Hall (pictured above left).
Hall said similar standards are in place for bushfire risk reduction.
“We've got standards for building flame proof homes,” he said. “They’ll likely to be able to survive a bushfire or wildfire event.”
However, he said an outdated mindset still dominates both insurers and government when it comes to flood resilience.
“We seem to have this mindset that we just need to put everyone back where they were and rebuild everything the same way it was,” Hall said. “It's just the definition of insanity.”
Hall said there are homes in Queensland that were flooded in February that are being rebuilt for the third time in five years.
One issue, suggested, Lou Gritzo (main picture, right side), is insurers and governments need to overcome the traditional view of nat cats as “static” and appreciate that they have become “moving targets.”
Gritzo is chief science officer for commercial property insurer FM.
“That moving target is something that we need to be proactive about in terms of applying the world's best science to understand it,” he said. “And even more importantly, figure out what we can do to reduce the impact that hazard has on businesses and public well-being in general.”
Hall suggested the forward-thinking brokers and their property-owning clients need to adopt.
“Your assets need to be durable for the climate and the environment you are living in today and what it's going to be like for the next 30 or 40 years,” he said.
Hall said the bank providing financing to these properties take this longer-term view.
“The durability and location should be front and centre,” said Hall.
This longer-term thinking, he said, needs to be combined with – by implication brokers and their clients telling – “a better risk story” about these assets.
“What am I going to do to be able to show that I understand the world I'm living in here and now, plus I've got one eye on the future,” he said. “I think that is where we've got to bring the intersection of the debate together, for businesses in particular, when thinking about this whole challenge.”
Hall and Gritzo said one obstacle to dealing with flood risks is developing effective public-private partnerships. The ICA CEO expected the Hazards Insurance Partnership (HIP) to help overcome this.
“We are very much becoming joined at the HIP with government on the question of data and peril data,” said Hall. “We feel that, as an industry, whatever we can share with government that we know are the risks in this country, governments will be getting a much deeper insight into where the challenges are.”
He suggested that these insights could help overcome political inertia around long term investment in disaster mitigation.
“That will result in premiums coming down,” said Hall.
Gritzo said Australia could also be guided by efforts in other countries to reduce flood risks, for example the flood scheme that supports homes in the UK. He said the US flood model is “horrifically expensive” but could also offer lessons.
“I think as we move forward, we will see some sort of public-private partnership, but it must be linked to mitigation and it must have a defined period,” said Gritzo. “If we can reduce the risk, we can normalize the market and we can share risk like we normally would anywhere else.”
According to the ICA, about 1.36 million properties are at risk of flooding.
For brokers, one focus area of this threat is properties in the southeast corner of Queensland. The area is home to about five million people and a major driver of the tourist sector with a concentration of commercial properties in flood risk areas.
Most of this year’s $1.5 billion in losses cited by the ICA came from ex-Tropical Cyclone Alfred’s flood impacts in this region. However, according to PERILS, that damage bill was much higher: $2.5 billion.
In February, the ICA called for a Flood Defence Fund (FDF). The $30.15 billion government investment over 10 years would aim to protect the country’s most at-risk catchments in Queensland, New South Wales and Victoria.
In March, the ICA shared a statement with IB responding to the government’s disaster mitigation efforts in its Budget.
“While we welcome the ongoing funding of the Disaster Ready Fund in last night’s Budget, we’re disappointed that it contained no new money for long-term investment in making Australia more resilient to extreme weather, in particular our most costly disaster- flood,” said the statement.
How do you see the increasing flood risk in Australia? How bad is it and what do you do to help clients become more resilient? Please tell us below.
