Nick Hawkins, managing director and CEO of Insurance Australia Group (IAG), has underscored the growing pressures facing Australia’s insurance sector as the frequency and severity of extreme weather events continue to rise.
Hawkins noted that the number of such events has doubled since 2015, presenting significant challenges for individuals, businesses, and the national economy.
He emphasised that the insurance industry, long regarded as a stabilising force, is now being tested by the scale and pace of climate-related risks.
“It’s clear a different approach is needed to prepare for, manage, and then recover from catastrophic events,” he said. “The need for a more coordinated response from businesses, governments, and society to the challenges we face as a result of this changing climate has never been more urgent.”
Hawkins described the insurance sector as a financial shock absorber, helping policyholders manage the impact of natural disasters.
Recent figures show that between 2020 and 2025, Australia experienced 14 declared catastrophes and eight other major weather events, resulting in $22.5 billion in insured losses – a 67% increase over the previous five years.
In 2023, general insurers issued 86 million policies and paid out approximately $50 billion in claims, with more than $22 billion directed to motor and home insurance.
Hawkins pointed out that these trends highlight the sector’s critical role in supporting economic stability.
“These figures represent the reality that without a robust insurance sector, businesses cannot expand, banks hesitate to lend, and our society faces economic decline. There will be further social imbalance,” he said.
Hawkins identified the rising cost of weather-related events, supply chain disruptions, and increased reinsurance expenses as primary drivers of higher premiums.
He cautioned that these pressures are particularly acute in high-risk areas, raising concerns about affordability and access to insurance.
“There’s a real risk that insurance will become inaccessible for those who need it most. Unfortunately, the most vulnerable often bear the brunt of climate volatility owing to their locations, and without adequate insurance, their ability to recover from disasters is severely compromised,” Hawkins said.
To address these challenges, Hawkins advocated for a range of solutions, including greater investment in flood mitigation, restrictions on new development in flood-prone areas, and updated building standards to improve resilience to severe weather.
Hawkins highlighted the importance of reinsurers in providing capital and risk-sharing arrangements that enable local insurers to offer broad coverage.
“Reinsurers provide the capital and risk-sharing mechanisms that allow local insurers to offer comprehensive coverage to all Australians. This interconnectedness underscores the importance of a strong insurance sector that can withstand local and global uncertainties,” he said.
In response to recent severe weather events and the federal government’s inquiry into the industry’s handling of the 2022 floods, Hawkins said IAG has reviewed its processes, increased resources, and improved communication with customers.
“But there is still work to be done. Trust is paramount, and we must continue to evolve to meet the needs of customers and communities,” he said.
The Australian Competition and Consumer Commission (ACCC) recently reported that the federal government’s cyclone reinsurance pool is beginning to reduce premiums for policyholders in cyclone-prone regions.
The ACCC’s latest monitoring report showed that, since the pool’s introduction in 2022, home and contents insurance premiums in medium-to-high cyclone risk areas have dropped by 11% per $100,000 sum insured.
The most significant reductions have occurred in coastal communities such as Mackay, Cairns, and Townsville, where median premiums have fallen by around 15%.
Small businesses in cyclone-prone regions have seen average premiums decrease by 24%, while strata insurance premiums have also declined, though to a lesser extent.
