Australia’s P&C could face $1.3b insured losses from Cyclone Alfred

The cyclone is forecast to make landfall on 7 March.

Australia’s largest property and casualty insurers are expected to manage claims from Tropical Cyclone Alfred, which could cause insured losses exceeding $1.27b (A$2b), S&P Global Ratings said.

The cyclone is forecast to make landfall on 7 March, along the southern Queensland coast, an area more densely populated and farther south than typical cyclone paths.  

The storm’s intensity and trajectory resemble some of the most severe natural disasters in Australia over the past decade. 

Strong winds, heavy rainfall, and storm surges are expected to affect the east coast, from the Sunshine Coast in Queensland to the Northern Rivers region of New South Wales, including Brisbane, home to about 2.5 million people.  

The Australian Cyclone Reinsurance Pool (ACRP) will absorb initial insured losses after insurers meet their deductibles, with additional extreme losses backed by the pool’s A$10b federal government guarantee.  

S&P Global Ratings credit analyst Craig Bennett said Australia’s three largest P/C insurers have strong credit quality, with maximum event retentions accounting for about 20% of their natural perils allowances. 

“Capital adequacy is very strong, or better, by our assessments, based on our global insurance capital model,” Bennett said in a note.

Eligible property claims within 48 hours of the event will be covered under the ACRP and government guarantee. 

Losses outside this coverage—such as large commercial damages or ongoing flooding—will be handled by primary insurers and their reinsurance programs.  

Brisbane City Council estimates about 20,000 homes could be at risk of flooding. 

This compares to the 2022 floods, which saw 35,000 homes materially damaged and 245,000 total claims, resulting in $4.06b (A$6.4b) in insured losses. 

The last major cyclone, TC Debbie in 2017, led to $1.14b (A$1.8b) in claims from approximately 77,000 claims.  

"A cyclone hitting a major city like Brisbane can result in elevated property damage and insurance claims and may include significant business interruption," said Bennett. "Most rated insurers have already enacted emergency disaster management plans.”