As residents and businesses clean up from the ravages of Cyclone Debbie, a second round of damage is hitting. Now insurance company shareholders are feeling Debbie’s blast.
Speaking out as the first of the big insurers covering Queensland and NSW, IAG says it will sustain a $170 million hit to pre-tax profit this year, thanks mainly to Debbie’s destruction, which was both intense and covered a large geographic spread.
It’s bad news for customers of all insurance companies exposed to Cyclone Debbie – with industry experts predicting now its blow to their profits will likely lead to an increase in insurance premiums.
There are several ways insurance companies can put measures in place to limit the costs of big disasters – called peril events. They can lay off risk through reinsurance, which itself can be a costly exercise. If the costs of reinsurance rise, they can be passed onto the insurers’ own policy holders.