Australia is heading into a summer shaped by warm oceans, a negative Indian Ocean Dipole and a likely weak La Niña, with insurers bracing for a cocktail of flood, cyclone, convective storm and heatwave risk that could pressure loss ratios, capital and reinsurance costs.
Meteorologists have announced they expect above-average rainfall in parts of the south-east and north-east from November to January, increasing the probability of repeated wet-weather losses. Senior Bureau of Meteorology forecaster Angus Hines said that, with catchments already primed, “With high water storages and increased soil moisture into the lower layers, there’s an increased risk of riverine flooding for Queensland, NSW and northern Victoria.” He also warned: “There is always a risk of tropical cyclones during our peak season between November and April. There has always been at least one tropical cyclone make landfall on the Australian coast each season.”
Sea-surface temperatures are running hot across multiple basins. In the North Pacific, a vast marine heatwave dubbed “the blob” has strengthened humidity and convective activity and contributed to unusual storms on the US West Coast. Climate scientist Daniel Swain told CNN the intensity of the heatwave was “phenomenal [and] really remarkable”. In Australian waters, prolonged warmth has been linked to back-to-back coral bleaching on both coasts and ecological stress events, including algal blooms and fish kills. On the Gold Coast, “early reports suggest [the deaths] are temperature-related and, as a consequence, there is low oxygen in the water,” marine biologist Dr Leonardo Guida told The Guardian.
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For insurers, the marine signal matters because warmer surrounding seas can turbocharge rainfall totals, increase the chance of slow-moving systems and lift the frequency of high-precipitation thunderstorms. Layered on a negative IOD and the risk of a late-spring La Niña, the season points to an elevated probability of serial flooding and surface-water flash-flood loss, alongside severe wind and hail outbreaks.
While wetter-than-normal conditions dominate the outlook, the Bureau also expects warmer daytime and overnight temperatures over large areas, with unusually hot days more likely in parts of Victoria and Tasmania. That combination raises compound-risk scenarios: rain-then-heat sequences that degrade roofs and building envelopes ahead of scorchers, or hot, humid periods that drive mould claims after water ingress. As the Australian Climate Service has highlighted, a warmer baseline increases the number of heatwave days under higher global warming scenarios, a background trend that feeds health, business-interruption and infrastructure claims even when headline catastrophes are absent.
Some brokers appreciate the implications of this climate challenge. “The "Blob" phenomenon is a powerful example of the butterfly effect in action — how distant events can have tangible impacts on seemingly unrelated things," said Shane Brady (main picture), director of Stone Lane Broking & Risk Advisory. “Volatile weather systems generally makes risk modelling a complex task but it appears this 2025-2026 summer may be particularly difficult to navigate for insurers.”
The Insurance Council of Australia (ICA) has warned that high-risk suburbs - often with below-average incomes - are sliding into a protection gap as flood premiums exceed household budgets. Its latest data suggest around three-quarters of properties deemed severe-to-extreme flood risk are not insured for flood. ICA chief executive Andrew Hall said, “Australia really is at the forefront of dealing with extreme weather events,” and called for governments to invest in “Projects like flood levees that will actually protect properties, projects like home strengthening against cyclone and bushfire risk.” He added: “As we think about the challenges moving forward, building more homes in Australia, we’re going to have to make sure those homes are built in a durable and resilient way.”
Regulators are signalling tighter expectations on resilience and accountability. Australian Prudential Regulation Authority (APRA) executive board member Suzanne Smith said, “Each claim filed tests how well those expectations are met,” stressing that capital strength, effective claims and risk management, operational resilience and cybersecurity remain essential. On innovation, she said, “AI shows considerable potential in areas such as underwriting, claims processes, cybersecurity, fraud detection, and crisis prevention,” and urged clearer communication on pricing drivers. Her message to boards: “If you master the basics, embrace innovation, and lead with a strong risk culture, you won’t just weather the next storm – you’ll strengthen trust in an industry that is essential to the community and our economy.”
Parametric solutions are gaining traction for cyclone and flood-exposed businesses, offering rapid payouts tied to indices such as wind speed or river height. Brokers point out that while parametric insurance is appealing due to these rapid payouts and adaptability, expanding its use for residential customers faces obstacles such as high costs and the risk that payouts may not always match actual losses. Some brokers have warned that there is also a risk that policyholders could be left without sufficient support for rebuilding, highlighting a potential gap in recovery after an event.
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• Flood and storm clustering: A negative IOD plus warm seas lift the odds of multi-region events within short windows, stressing claim surge capacity, supply chains and temporary accommodation allowances.
• Cyclone uncertainty: Even an average landfall count can be costly if storms are rain-loaded or stall. Watch secondary perils - tornado, giant hail and flood - around the cyclone envelope.
• Heat and humidity claims: Higher night-time minima elevate heat-related health claims, mould and contents damage after water events, and HVAC breakdown frequency.
• Underwriting drift: More granular, property-level flood and wind data are tightening appetites, increasing peril sub-limits and pushing deductibles higher in repeat-loss postcodes. Expect sharper scrutiny of floor levels, drainage, roof condition and local mitigation.
• Reinsurance sensitivity: Treaty pricing and capacity will remain exposed to Northern Hemisphere loss experience. Placement outcomes will favour cedants who can demonstrate portfolio de-risking and credible event-response performance.
• Claims readiness: Carriers with established mobile hubs, triage for vulnerability, and pre-agreed panel capacity for builders, restorers and assessors are better positioned for back-to-back events.
Brokers should prioritise early renewals for flood-exposed risks, document property-level mitigation, and prepare insureds for higher deductibles and sub-limits. Emphasise roof maintenance, guttering and backflow prevention, verify floor heights and critical plant locations and review business-interruption sums insured for prolonged wet-weather disruption. For coastal councils and corporates, portfolio-wide strategies - levees, drainage upgrades, fire-hardening and cyclone tie-downs - remain the most effective path to premium stability.
Brady said his firm has embedded climate and weather variability into its client assessment process. He shared additional tips around stress-testing commercial asset portfolios to ensure clients are structurally and financially prepared.
"We can also assess the resilience levels of commercial assets with things like roof and drainage resilience reports and, in all cases, encourage early renewal negotiations for higher risk locations to ensure all of the viable options that are available in the market are explored in advance," he said.
How do you see the insurance implications of "The Blob"? Please tell us below
