Home Australia Aussie homeowners could face an insurance crisis following the Los Angeles fires

Aussie homeowners could face an insurance crisis following the Los Angeles fires

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Natural disasters such as wildfires and floods have increased insurance costs beyond inflation.

Australians may have to pay more for their home insurance as catastrophic fires in the US join a growing list of climate disasters that drive up premiums.

Natural disasters have increased Australians’ insurance costs beyond inflation, an Australia Institute analysis shows.

Even events on the other side of the world, such as the Los Angeles fires, can still affect Australia, as factors that increase the frequency and scale of natural disasters globally will also do so within Australia.

This has left disaster-prone regions of Australia almost uninsured as coverage becomes unaffordable, said David Richardson, senior researcher at the Australia Institute.

“The increasing number, scale and intensity of natural disasters such as bushfires, cyclones and floods, due to our changing climate, is a global phenomenon that will affect insurance premiums around the world, including here in Australia,” he said.

“The Los Angeles fires are a tragedy that will have global consequences for years to come.”

The reinsurance market, where insurance companies buy insurance from larger international organizations to mitigate their own losses from natural disasters, also has a role to play.

Hurricane Ian, which hit Florida in 2022, made 2023 the third costliest hurricane season on record, adding to global pressures on the reinsurance sector.

Natural disasters such as wildfires and floods have increased insurance costs beyond inflation.

California wildfires will affect insurance premiums around the world

California wildfires will affect insurance premiums around the world

“As the world’s large reinsurers increase premiums to cover their losses from natural disasters, local insurance companies will be forced to do the same,” Richardson said.

The Los Angeles fires have killed at least 24 people and left thousands more displaced under evacuation orders.

Sewage, water and power infrastructure has been severely damaged and more than 12,000 structures have been destroyed.

The cause of the fire is still unknown, and although government agencies have not yet provided damage estimates, the event could be one of the country’s costliest natural disasters.

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