South Australia’s algal bloom has caused an unprecedented environmental tragedy and cost the economy hundreds of millions of dollars: marine life is devastated, the fishing industry is crippled and tourism is hard hit. This ongoing catastrophe is likely just a foretaste of what’s to come and not a once-in-a-generation environmental shock. With government and other stakeholders noticeably reticent about holding responsible parties to account, the insurance industry could be the only hope for stopping the next algal bloom. Insurers and brokers can make water use and governance a risk managed, priced, policed and insurable risk.
The event sits squarely in a frame that brokers and underwriters understand: systemic loss with cascading BI-style impacts. A federal parliamentary report put South Australia’s fisheries and aquaculture contribution at $788 million in Gross State Product and more than 6,250 jobs, before detailing widespread shutdowns and flow-on damage across fishing, aquaculture and tourism.
Tourism is telling a similarly brutal story. The Tourism Industry Council SA (TiCSA) said 99% of tourism businesses that responded to a survey on algal bloom impacts had lost income, with an average downturn of 40% and an average loss of $52,000.
And yet, many Australians would say the public response has been oddly lopsided: enormous sympathy for the victims; far less urgency to navigate to any responsibility upstream where incentives, allocations, trades, runoff controls, compliance, monitoring and “who pays” decisions live.
This is where an uncomfortable contrast becomes unavoidable. Governments can fund clean-ups, financial support and scientiific investigations. Questions like who carries responsibility and who pays the cost of prevention have barely been treated.
Anthony Saunders (pictured), an environmental liability specialist broker, has an analogy that should make underwriters sit up: “There's no catalytic converter at the end of the Murray River," he said.
Saunders is partnership director for EnviroSure at Gow-Gates Insurance Australasia.
The government is taking care of fixes at the coastline through monitoring, closures, vouchers, reef restoration, beach patrols - while the upstream drivers and incentives remain fragmented across jurisdictions, industries and trading systems.
Saunders’ point isn’t that one actor caused the bloom in a neat, litigable way. It’s that the risk is structurally designed to accumulate and then externalise - which means the biggest question for brokers and insurers is likely whether this is a risk-management failure with known controls that nobody is enforcing?
Saunders puts the accountability gap more bluntly: “No-one's pointing a finger further up the line," he said.
The algal bloom can be viewed as a classic uninsured (or underinsured) systemic exposure: diffuse causation, slow-onset harm, multiple contributors, long tails, huge reputational damage - and a response that focuses on relief rather than prevention.
Governments have, to their credit, mobilised money and programs at scale. The state and federal governments jointly announced a $102.5 million “Algal Bloom Summer Plan”. But even that framing is telling: it’s a “summer plan”, not a market redesign.
And when a government response is built around emergency funding rather than enforceable upstream controls, insurance has an opportunity to become the de facto regulator - not by virtue of statutory power, but by virtue of leverage.
If the bloom is treated as purely “natural”, the market implication is grim: premiums rise (or capacity retreats), but the hazard stays. If the bloom is treated as a controllable accumulation of nutrients, discharges and reduced dilution then the risk can be priced and managed, like fire and flood.
Saunders goes straight to the contentious edge of Australian water politics: “Those who grow cotton crops have the highest consumption of water from the rivers,” he said.
Whether or not any particular operator is legally responsible for this bloom, the underwriting relevance is obvious. High water extraction that leads to high nutrient runoff is not an abstract ESG issue - it is a precursor to loss.
Now add the water market layer: trades, allocations, intermediaries and professional services that sit between “permission” and “practice”.
Here Saunders’ argument becomes very insurance broker-relevant: water brokers - intermediaries facilitating allocations and trades - are professionals with professional indemnity exposures and insurance they buy through brokers. This PI is where responsibility arguments often land when causation and control are contested.
He calls it out as the taboo topic: “it's probably the white elephant in the room.”
If governments and public agencies are unwilling or unable to adequately protect the environment and people from unsustainable farming practices, water issues and the sometimes unfortunate results of water brokers and water trading, the fight may reappear as a technical dispute between insureds, brokers, PI wordings, pollution exclusions, disclosures and subrogated recoveries.
Saunders sees a pathway that will sound very familiar to claims people: “there will be recoveries made along the way from somewhere.”
This is the commercial kernel of the story. Even if no prosecutor ever files charges and no regulator ever pins a single entity to the wall, loss costs don’t vanish. They can move. They can surface in BI disputes, in PI notifications, in negligence pleadings, in statutory interpretation, and in the quiet hardening of appetite.
Saunders predicts what the legal market always predicts - eventually the loss looks for a defendant: “Someone's going to get sued at some point along the line, for sure.”
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The relevant question for brokers and insurers could be: why wait? If underwriting can demand sprinkler systems, flood barriers, cyber controls and business continuity plans, why is upstream nutrient runoff treated as “someone else’s problem” - especially when the downstream industries (tourism, fishing, aquaculture) can’t diversify away from the coastline?
Here is the opportunity for the broking and underwriting community in environmental lines: stop treating water as a soft “sustainability” theme and start treating it as a hard condition of cover.
That means building practical, measurable requirements into policy placement and renewal discussions for agriculture clients and water-market intermediaries.
A prevention-minded approach could include:
The industry doesn’t need to become a shadow EPA. It just needs to stop subsidising unmanaged risk. This is not activism. It’s underwriting.
