Heatwave

Event: Southeast Australian heatwave and bushfires, 2009
Location: Melbourne, Australia

Economic cost: $2.8bn. Insured losses totalled $1.03bn, excluding life insurance.

Description: Southeast Australia experienced a devastating heatwave in January and February 2009, which culminated in a series of catastrophic bushfires in the state of Victoria on 7 February. Hundreds of fires broke out, some of which caused deaths, injuries and damage to property.

Damage: The total number of fatalities in Victoria arising from extreme temperatures at the heatwave's peak was 980, compared to a mean of 606 for the previous five years. The fires caused substantial losses of grazing pasture and feed production, as well as an estimated 11,800 head of livestock, which significantly reduced subsequent agricultural production.

Insight: 84% of claims received by mid-March related to property or contents and 16% to motor vehicles. Totalling around $720m, they required great sensitivity on the part of adjusters and insurers, especially when dealing with under-insurance. Many of the fire response plans worked well – informing residents of the threats despite changing wind direction, protecting major reservoirs from contamination and defending the perimeter of the city as the fires approached. Nevertheless, additional risk mitigation measures have been put in place including new building regulations for fire-prone areas.

Insurance solutions: The Lloyd's market offers cover in relation to Heatwave. Examples of this include but are not limited to: Crop and agriculture insurance, property catastrophe reinsurance, commercial and residential property, home and contents, professional indemnity, business interruption and contingent business interruption insurance as well as parametric and ILS products (eg collateralised reinsurance and industry loss warranties).

Image: A forest northeast of Melbourne burns during the Southeast Australian heatwave and bushfires of 2009 (Getty Images)

Sources: Insurance Council of Australia; UN Intergovernmental Panel on Climate Change; Victorian Bushfires Royal Commission

Increasingly, we are seeing challenges involving complex systems, such as the interaction of heatwaves with the built environment, and possible drivers from climate change potentially exacerbating the trend. We need to consider how we can understand these hazards better.

Dickie Whitaker, Chief Executive, Oasis Loss Modelling Framework

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