Risk managers must act to tackle climate change as premiums soar in Australia

Australian risk managers, particularly those in the tourism industry, must brace themselves for tough renewals during 2020 as the bushfires that have devastated the country during the last two months continue to rage. A leading tourism association executive warned only last month that any “responsible” risk manager would accept that the mounting evidence of the dramatic impact of climate change needs to be tackled at source. Insurers in Australia have already received almost 4,300 insurance claims, valued at A$297m, since the main bushfires began on 8 November in Australia. But, the total cost will clearly be much higher once the smoke has finally cleared and tour operators alone are expecting costs of hundreds of millions of dollars. Reef Casino Trust, the ASX-listed owner of the 128-room Reef Hotel Casino in Cairns, told the Sydney Morning Herald newspaper that its annual insurance bill had already risen by almost 60%. Insurers in Australia are clearly rapidly reassessing the risk natural disasters and climate change pose to the state’s tourism operators as the fires rage. The company told investors this week that its insurance bill would jump A$487,000 to A$1.3m in 2020. The casino also had limits placed on how much it could claim for damage caused by cyclones, flood and tidal waves, according to the newspaper. The impact of the rocketing insurance cost should not be underestimated. An increase of A$487,000 in insurance costs is equal to nearly 10% of the group's 2019 net profit. In its statement, Reef Casino said the price hike followed a review carried out with its broker and was caused by "challenging market conditions in the insurance industry”. Daniel Gschwind, chief executive of the Queensland Tourism Industry Council (QTIC), reportedly told the Sydney Morning Herald that almost all tourism operators face significant insurance price rises, many double the amount paid last year. Mr Gschwind said that many businesses, including marine tourism operators, can no longer find cover for their businesses. Only last month, the QTIC issued a stark warning about the impact of climate change on the tourism sector in Australia after the High Level Panel for a Sustainable Ocean Economy, including the Australian government, issued a report at the UN Climate Summit in Madrid. The report – The Expected Impacts of Climate Change on the Ocean Economy – suggests potential economic losses by the end of the century of more than 90% for reef tourism around the world. Mr Gschwind commented: “Any responsible risk manager would accept this, and all the other scientific evidence, as a priority red-light warning of what is at stake. We can invest in the biological and economic future of the Great Barrier Reef (GBR) now or bear a far greater cost in the future.” QTIC pointed out that the tourism industry has been advocating strongly for action on climate change for some time, with the first GBR tourism climate change report released by QTIC and WWF in 2004. Mr Gschwind said: “We need to accelerate these efforts in strong partnerships with all levels of governments and the community to do more to build the GBR’s resilience, but we cannot ignore our national responsibilities to tackle the global climate change threat.” The GBR tourism industry alone showcases the reef to two million visitors a year, sustains 64,000 jobs and generates $6bn in expenditure in the local economy annually, stressed QTIC. Catastrophe modelling firm AIR reported yesterday that roughly five million hectares (12.35m acres) have burned, at least 17 people have died, and more than 1,000 homes have been destroyed in hundreds of bushfires occurring within a vast area. Smoke from the fires has led to hazardous air quality – posing health risks, closing schools and disrupting travel for about a third of Australia’s population. AIR reported that, according to Australia’s Bureau of Meteorology, 2019 was the hottest and driest year on record. “Extreme heat and extreme drought conditions are key ingredients for bushfire that have been exacerbated by climate change over the last few decades. Temperatures of more than 40° celsius (104° fahrenheit), dry conditions and strong winds are forecast for the coming weekend, heightening the immediate risk. In the long term, climate change is expected to increase the severity and frequency of conditions conducive to bushfires,” stated AIR.

Risk managers must act to tackle climate change as premiums soar in Australia

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