Global insurers are still assessing the cost of Russia’s powerful 8.8 magnitude earthquake last week, the sixth biggest earthquake ever recorded. The event triggered tsunami alerts across the Pacific, including in Australia, and property damage across Russia’s Kamchatka region. Industry stakeholders have said, so far, they expect minimal claims and few resulting losses for Australian businesses. However, the way this event impacts water risks policy wordings could be an area for local brokers to watch.
“Coastal communities will still need to be aware of potential aftershocks and further warnings or evacuations and review coastal defence infrastructure to ensure risks to buildings and assets are mitigated as much as possible,” said James Dalziel, earth risk research lead for the Willis Research Network at WTW. “There may also be supply chain disruption from shipping and short-term impacts on tourism, so these industries may be subject to insured losses.”
Aon expects claims for damage to coastal and marine infrastructure, such as marinas, jetties, aquaculture farms and vessels. Aon said these may have been impacted by strong currents linked to the tsunami. “There may potentially be some business interruption claims from port operations that were suspended and coastal tourism operators whose businesses were impacted by beach closures, or vessel re-routing, affecting marine-cargo policies,” said Wild.
Both WTW and Aon warned of the possibility of impacts on Australia in the coming weeks from any large magnitude aftershocks and further tsunami waves.
“Although it’s unlikely this will be to the same extent as this mainshock event, these aftershocks may still threaten shipping lanes and nearby coastal communities in the Pacific,” said Dalziel. “If further waves coincide with high tides, this effect may be amplified.”
For Australia’s brokers, the main impacts could be in the small details of policy wordings and the coverage limits insurers apply. Aon’s reinsurance team suggested global insurers will be reviewing policy wordings with their clients to clarify the extent of tsunami and earthquake cover “particularly around specific sub-limits or exclusions for things like ‘actions of the sea’, ‘landslip following an earthquake’ or specifics around business interruption and contingent business interruption cover,” said Wild..
Currently, the Insurance Council of Australia (ICA) said, it’s not standard for insurers to offer ‘actions of the sea cover’ and any changes among those that do could affect a broad range of stakeholders in Australia, particularly businesses threatened by water risks.
In a vulnerability study, the ICA said “actions of the sea” are responsible for a growing protection gap in insurance as the changing climate increases exposure and risk.
“This is leaving Australian communities, properties, and critical infrastructure increasingly vulnerable,” said the report.
How do you see the local insurance impacts of Russia’s tsunami and earthquake event unfolding? Please tell us below.
