Cyclone Debbie cost Swiss Re an estimated $350 million and the insurance industry roughly $1.3 billion, the world’s second-biggest reinsurer said on Thursday, an unusually high loss that could see reinsurance prices rise in Australia.
Cyclone Debbie, a Category 4 storm, slammed into Australia on March 28. The storm, one level shy of the most powerful Category 5, killed six people, smashed tourist resorts, brought down power lines and shut coal mines, before moving on to New Zealand.
“We are a lead reinsurer in this market and estimate that Cyclone Debbie has caused higher commercial and corporate losses compared to similar events in the past,” Swiss Re Chief Underwriting Officer Matthias Weber said in a statement.
Reinsurers act as financial backstops for insurance companies and help them pay for large claims from hurricanes or earthquakes in exchange for part of the premiums.
The high losses were a result of the densely populated, commercially active area the storm hit, a spokeswoman said, with hundreds of residential and commercial buildings flooded and thousands of residents and businesses evacuated from the region.
The disaster zone stretched 1,000 km (600 miles) from Queensland state’s tropical resort islands and Gold Coast tourist strip to the farmlands of New South Wales state.
Five miners in the cyclone-hit region, including BHP Billiton and Glencore, have declared force majeure — a clause typically invoked after natural disasters — since multiple landslides and flooding knocked out major coal rail networks.
Despite hindering profits, higher catastrophe costs can ease pressure on pricing in the reinsurance markets.
The expensive cyclone may lead to a rise in Australian property & casualty reinsurance pricing in the next July or January contract renewals rounds, a spokeswoman said. However, the event did not impact business written in April, which is largely concentrated in Asia.
Shares in Swiss Re fell 0.9 percent by mid-morning, lagging Europe’s overall insurance index, which was down 0.5 percent.
“The loss from cyclone Debbie is higher than expected and reflects a bad start to the year because this high-claims event will not reduce reinsurance capacity in the market,” Vontobel analyst Stefan Schuermann said in a note. (Additional reporting by Joshua Franklin.)