Cyclone Alfred Could Cost Australian Insurers Over $1.3 Billion
By Ahmad Zaki | March 7, 2025
Australia’s insurance sector is bracing for potential losses exceeding AUD 2 billion (approximately $1.265 billion) due to tropical cyclone Alfred. The cyclone is expected to make landfall on the southern Queensland coast on March 7, 2025.
A cyclone is seen.
S&P Global Ratings recently issued a report indicating that the path and intensity of the cyclone are uncertain, but past events suggest the potential scale of insured losses. The report highlighted that the current parameters of Cyclone Alfred are similar to, or potentially exceed, some of Australia’s most costly natural disasters from the last decade.
The Australian Cyclone Reinsurance Pool (ACRP) will cover the initial layer of insured losses after an initial deductible held by the insurer. Extreme losses can be covered by the pool’s AUD 10 billion Federal Government guarantee.
“Australia’s three largest P/C insurers have strong credit quality and their maximum event retentions are well covered at the moment and represent about 20% of each entity’s natural perils allowance,” said Craig Bennett, a credit analyst at S&P Global Ratings. “Capital adequacy is very strong, or better, by our assessments, based on our global insurance capital model. Credit fundamentals of the rated insurers are supplemented with participation in the ACRP.”
Ahmad Zaki, writer of the article.
Primary insurers will have access to their own resources and significant reinsurance covers for claims that fall outside the scope of ACRP cover, such as large commercial losses or damage caused by ongoing rain and flooding.
Strong winds, heavy rainfall, and storm surge are anticipated to impact the east coast of Australia, stretching from the Sunshine Coast in Queensland to the Northern Rivers region of New South Wales. This includes the major city of Brisbane, home to approximately 2.5 million residents.
“A cyclone hitting a major city like Brisbane can result in elevated property damage and insurance claims and may include significant business interruption,” Mr. Bennett stated. “Most rated insurers have already enacted emergency disaster management plans.”
The Brisbane City Council estimates that about 20,000 homes in the Brisbane area alone are at risk of inundation. The 2022 floods resulted in approximately 35,000 homes materially damaged out of a total of 245,000 claims, with claims totaling about AUD 6.4 billion. In 2017, Tropical Cyclone Debbie resulted in claims of approximately AUD 1.8 billion from around 77,000 claims.
S&P Global Ratings notes that this report is not a rating action.
