Australian bushfire losses could affect earnings and reinsurance renewals, warns AM Best

Ratings agency AM Best has warned that the reinsurance market could be impacted by Australia's unprecedented bushfires that have caused overall estimated losses of A$2.2 billion ($1.5 billion) so far and are expected to increase.

AM Best's associate director, analytics, Alex Rafferty stated that many Australian insurers appear positioned to absorb losses from the recent bushfires, but the fires could affect earnings and reinsurance renewals.

“Ultimate loss estimates may take some time to be determined; however, it is clear that the current bushfires will be one of the costliest on record in terms of the volume of insured losses and from a property damage point of view,” said Rafferty.

Rafferty also addressed the capabilities of the Australian insurers to manage these losses.

“AM Best is of the view that insurers are well-placed to withstand these losses. In recent years, Australian insurers have demonstrated their ability to absorb natural catastrophe event losses. This is reflected in their strong capital positions and the support they receive from their reinsurance partners,” he said.

“Meaningful losses passed on to reinsurers could result in upward pressures on reinsurance rates, as well as potential timing on terms and conditions, on upcoming renewals,” he added.