The financial industry regulator says insurers may be able to pay future claims, but fewer people will be able to secure coverage
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| The insurance issue is making bushfire recovery around Cobargo harder, says Michael Brosnan of Social Justice Advocates of the Sapphire Coast. Photograph: Brook Mitchell/Getty Images |
Millions of Australians could be left uninsured as the effects of climate change put increasing pressure on the financial system, the industry’s regulatory body has warned.
The Australian Prudential Regulatory Authority (Apra) executive director Dr Sean Carmody told a Senate hearing on Tuesday the nation’s insurers and banks were taking steps to prepare for worsening bushfire seasons and more extreme weather events.
However, he said the resultant rising insurance premiums may put coverage out of reach for many people, threatening the stability of the wider economy.
"From our point of view in terms of thinking of the financial system as a whole, it’s not enough if insurers have the capacity to pay every claim, but there’s a shrinking number of people who can actually secure insurance,” Carmody told the hearing.
Carmody said the regulator had been regularly advising large financial institutions about the financial risks posed by climate change.
This advice went beyond the physical and “transitional” risks – that is actions by shareholder activists or protesters – but also to the possibility of future lawsuits where no action is taken now.
“Increasingly, there are court cases here and internationally that suggest if we do not think about and look at climate risk, there’s potential liabilities that arise there,” he said.
The total cost to the insurance industry from extreme weather and natural disasters between November 2019 and February 2020 alone stood in the range of $5bn.
With similar events likely to increase in frequency and extremity in the future, Carmody said Apra was investigating how it may impact the country’s biggest financial institutions over the next 30 years.
Pressed by the Labor senator Tim Ayres on whether climate change would eventually “overwhelm” even the best efforts at mitigation, Carmody agreed.
“The cost of insurance is trending up, which will translate to higher premiums in aggregate,” he said.
His comments follow evidence given by residents still struggling after the catastrophic bushfires of 2019-20.
Michael Brosnan, the chair of community group Social Justice Advocates of the Sapphire Coast, said the insurance issue was making it harder to mount an effective recovery in the area around Cobargo in New South Wales.
Brosnan said his organisation was aware of at least 63 people waiting for basic sanitation some 14 months after the bushfires tore through the region.
“Up until June or July last year, many of these people were driving to Rocky Hall and Wyndham for toilet, shower and internet,” Brosnan said.
Links
- Australia must prepare now for climate-related disasters or pay more later, insurance regulator says
- Insurance giant Suncorp to end coverage and finance for oil and gas industry
- Anti-Adani coalmine activists target insurance broker with virtual protest
- Climate crisis will make insurance unaffordable for people who need it most
- Most Australian chief executives believe climate crisis a threat to business
- If the bushfires won't force climate policy change, we need to circumvent Scott Morrison
- Scott Morrison in danger of becoming a 'climate change casualty', says Steve Bracks
- Suncorp and IAG temporarily stop selling insurance in fire-affected areas of Victoria and NSW
- 'A duty of care': Australian teenagers take their climate crisis plea to court
- Australia's summer the wettest in four years amid cooling La Niña
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