Wildfire Costs Manageable Says Credit Firm

Ratings firm DBRS Morningstar has released new analysis which believes that Australian insurers will be able to withstand the claims which have been created by the recent and ongoing wildfires.

The commentary titled “Wildfire Challenges Manageable for Australian P&C in Q1 2020.” Reports the Australian property and casualty (P&C) industry, is likely to face approximately Aus$2 billion in claims due to natural catastrophes in Q1 2020.

It added that the 2019–20 wildfires might become the largest fire event in Australian history but are still a relatively small loss on a global scale. As such insured losses following Australian wildfires should have “minimal impact” on the industry’s capitalisation.

“Australian P&C insurers’ earnings will come under pressure during the last quarter of 2019 and the first quarter of 2020, as they feel the weight of catastrophe claims coupled with low interest rates,” says Marcos Alvarez, Senior Vice President, Global Financial Institutions Group. “We estimate that Q1 overall underwriting results for the industry will be on the negative side and might not be compensated by investment income during the quarter. However, the losses of these events, in the absence of any other major catastrophe during 2020, should be absorbed by the annual results of the Australian P&C industry with negligible impact on its capitalisation.”

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