Insurance Australia Group (IAG) has confirmed its major rural and regional insurer, WFI, will join its other subsidiary, CGU, in no longer providing public liability cover if there is "unconventional gas" operations on properties

ABC News, 10 June 2020:

Image: ABC Southern Queensland: Nathan Morris

Australia's largest insurance company says it will no longer cover farmers for public liability if they have coal seam gas (CSG) infrastructure on their property. 

The development has made farmers fearful they will have to cease farming altogether if they cannot get cover. 

Insurance Australia Group (IAG) has confirmed its major rural and regional insurer, WFI, will join its other subsidiary, CGU, in no longer providing the coverage if there is "unconventional gas" operations on properties. 

IAG said for customers who "have operational CSG or shale gas activities or infrastructure on their property, such as a coal seam gas well, we will be unable to provide liability cover as part of their insurance policy". 

IAG said the company does not specialise in mining and resources operations and the change will affect existing customers when their policies come up for renewal. AgForce Queensland said that is as soon as the end of this month. Michael Guerin talks to a man in front of a book shelf. 

AgForce Queensland CEO Michael Guerin says farmers are worried the change could expose them to liability risks..... 

Queensland farmers said they were fearful the change could expose them to liability risks and could extend to other risks associated with CSG, such as the potential for groundwater contamination. 

It is understood the Queensland Government has been holding talks with insurers, mining industry representatives and AgForce, in an attempt to resolve the problem..... 

ABC News has obtained legal advice provided to the New South Wales Government in 2014, warning that insurance for CSG in Australia was "inadequate" and measures were needed to address the potential cost of contamination risks. [my yellow highlighting]

AgForce's Queensland chief executive Michael Guerin said farmers were deeply concerned. 

"Producers, like any business, can't operate without insurance," Mr Guerin said.

Spokesperson for the Lock the Gate Alliance, Rick Humphries is calling on the gas industry to compensate farmers.....

He said while some other insurers were providing cover for now, there was a risk they would pull out of the sector or jack up prices. "All of those dangers are there," he said. 

"There's a danger that insurance premiums will go up [and] there's a danger insurance will be harder to get." 

AgForce Queensland said insurance being withdrawn threatened the coexistence of unconventional gas and agriculture. 

He said there had been a lot of hard work in devising complicated agreements to allow the two industries to work together over the years. 

"If part of the insurance industry starts withdrawing cover, it puts that at risk, and that's the core of the concern at the moment," Mr Guerin said. 

Anti-mining, pro-agriculture group Lock the Gate said the gas industry should be made to compensate farmers. Spokesperson for Lock the Gate and former mining consultant, Rick Humphries, said farmers should not be the ones facing the risk. 

"The onus is on the gas industry to get insurance products that cover their assets and protect the farmer," Mr Humphries said. 

"The farmer shouldn't have to run around and look for insurance products. 

"But the way that the system has worked is that the Government has knowingly allowed gas industry to enter into contracts with farmers that expose farmers to a whole range of business and natural resource risks around water and land contamination." 

He said laws needed to be changed to force the companies to act. "The whole mining and gas model is all about transferring as much risk away from the shareholder," he said. 

"The companies won't willingly step up and do this because it's an additional expense, and they have to take on the risk. 

"Governments have to intervene to force mining and gas companies to take out insurance products, or demonstrate they [have] adequate coverage that will compensate landholders."......

Read the full article here.

BACKGROUND

* Queensland Government Audit Office 2019-20 report on Queensland coal seam gas activities can be found at:
https://www.qao.qld.gov.au/reports-resources/reports-parliament/managing-coal-seam-gas-activities

* ABC News, 30 March 2020:

A leaked expert report shows the Queensland Government was advised to stop further gas fracking in the state's sensitive Channel Country, but a separate department had already extended gas exploration until 2030. 

A confidential report to the Queensland Environment Department prepared by environmental scientists recommended that infrastructure for gas fracking and mining was "unacceptable" in the Lake Eyre Basin floodplains, known as the Channel Country. 

The 47-page report, obtained by ABC News, lists scores of potential risks associated with so-called unconventional gas extraction, (also known as gas fracturing or fracking), including direct impacts on threatened species and water quality. 

As ABC News revealed earlier this year, the Queensland Mines Department in March 2019 had approved Santos to keep exploring commercial gas opportunities in the area until 2030, despite an election commitment to protect "pristine rivers" and work with stakeholders. 

A union of environmentalists, graziers, traditional owners and other stakeholders, known as the Western Rivers Alliance, said the promised consultation did not happen. 

The report, recommending that further fracking for natural gas be stopped, was received by the Environment Department in October last year.....

Global insurance industry has begun to retreat from regions badly affected by climate change

Almost as soon as federal, state and local governments around the world began to consider what climate change might mean to them, it became obvious the insurance industry had been do the same for some time and had considered its options - at one point expressing a view that residential premises within the coastal fringes might become uninsurable and the land on which these homes were built would be rendered worthless by climate change.

Now QBE is turning that prediction into a reality.......

The Sydney Morning Herald, 17 February 2020:

Global insurance giant QBE has warned climate change poses a material threat to its business and the entire economy as its chief executive Pat Regan said premiums were at risk of becoming too high in areas exposed to repeated, extreme weather. 

QBE has been forced to cut operations in countries where the climate risk is too high and Mr Regan said severe weather means customers in certain [areas] may be priced out of certain types of insurance in Australia and around the world. 

"We got out of places like the Philippines, Thailand, Chile, Puerto Rico [where] it was just too much climate change weather impact risk there that the risks just weren't worth it," Mr Regan said. 

Mr Regan said there had always been parts of the world that were difficult to insure, but as floods and fires become have dominated headlines this summer, this risk was increasing across "swathes of Australia" and could potentially price out customers from home and business property insurance. 

Mr Regan said climate change was a "big topic" in the sector, requiring the insurance giant to "up its game on a number of fronts". QBE boosted its reinsurance program for catastrophic events to $2 billion in a process that would be reassessed each year, Mr Regan said. 

"What that means is you could have a one-in-200-year storm and we'd be protected," Mr Regan said. 

"Whatever your more broad thoughts on climate change are, the evidence is clearly there that the frequency and severity of weather events is increasing over time. 

"The evidence is there for all to see that the amount of weather events globally, not just in Australia, is consistently rising and most of the worst years on record have happened in the last 10 years."  [my yellow highlighting]

ABC News, 3 January 2020:

....the number of “uninsurable” addresses in Australia is projected to double by the turn of the century to nearly 720,000 — or one in 20 — if nothing is done to address escalating risk from extreme weather and climate change. Thousands more will see their insurance premiums double or even triple within decades, the data reveals.....

In Newcastle-Maitland, NSW, the number of uninsurable addresses will rise five-fold by 2100, to nearly one in seven.....

On the Gold Coast, increased risk from flooding and inundation will push the number of uninsurable addresses to 64,000 by 2100 — or one in six. 

In Palm Beach, Broadbeach Waters and Bundall, more than half of addresses are projected to become “uninsurable” by 2100.

Financial Review, 27 October 2019:

Extreme weather has been making strata property in north Queensland very difficult to insure....

Strata insurance is the insurance that covers entire apartment complexes, as opposed to individual houses. As one insurer told The Australian Financial Review, large complexes pose much higher risks than single houses.....

Assessing the risk to these properties is difficult, and a number of insurers have simply stopped trying. Suncorp, one of the big three ASX-listed general insurers, falls into this category. It no longer underwrites complexes with more than 10 units, or an insured value of more than $5 million. QBE, Zurich and the major reinsurers have also pulled out.

Australian Parliamentary Library, Records of the Parliamentary Commission of Inquiry, "Inquiry into climate change and environmental impacts on coastal communities", October 2009:

Climate change is projected to have a major impact on the frequency of extreme weather events, with the coastal zone being particularly vulnerable in this regard because of the combined effects of sea level rise and storm surge/flooding events. 

In its submission to the inquiry, the peak body for the insurance industry, the Insurance Council of Australia (ICA), noted that: 

more than 425,000 Australian addresses are below 4 metres above mean sea level and within 3km of the current shoreline. Within the Greater Sydney region (Newcastle to Wollongong), 46,000 addresses are identified as being within 1km of the shoreline and with elevations less than 3m. 

The ICA further observed that the majority of these vulnerable addresses are located near ocean-connected coastal waters—that is, alongside lakes, river banks and estuaries—and that properties in coastal settlements which are also on inland floodplains ‘can be liable to both river and ocean inundation, often concurrently’. 

Climate change could have adverse impacts on insurance affordability and availability, compounding the problem of under-insurance: 

Around 23 per cent of Australian households (1.8 million) are currently without building or contents insurance. As insurance premiums rise, more households may opt out of insuring, putting an added burden on governments and communities when disasters occur.

Exodus of senior NDIS officials over the last fifteen months

When well-paid senior management – some in the top percentile of Australia’s income earners – begins to abandon ship it’s time to consider if the Abbott-Turnbull-Morrison Government has finally sunk the National Disability Insurance Scheme.

The Australian, 5 July 2019:

...The NDIA has confirmed deputy chief executive Michael Francis has resigned and will leave in September to take a role “closer to home”.

A spokeswoman also confirmed chief risk officer Anthony Vella has recently departed, along with Antonia Albanese, who was head of markets, provider and market relations.

Ms Albanese and Mr Vella both directly reported to the chief executive.

The Australian has also been told the general manager of critical services issue response, Stephanie Gunn, has quit.

Mr Shorten told The Australian Mr Robert was “either oblivious or delusional” for telling parliament the scheme was being run well.

“It is alarming that this group of senior executives lack such confidence in the way the NDIA is being run that they are choosing to leave,” he said. “This scheme is so important for the vulnerable but is being chaotically implemented.

“Yet the minister in parliament has told the nation it’s all going swimmingly. He must be either oblivious or delusional.”

The NDIA spokeswoman said: “The NDIA is grateful to our departing senior executives, who have made significant contributions to the NDIS.

“The NDIA has a strong and experienced leadership team, focused on continuing to guide the agency to deliver improved outcomes for NDIS participants. Interim arrangements with - experienced personnel have been put in place.”

The confirmation of executive departures came after Mr Shorten tweeted he was “hearing” that four senior staff resigned in the past seven days.

Former chief executive Robert De Luca suddenly resigned in May and is yet to be replaced. Former communications head Vicki Rundle is acting chief executive.

Mr Robert — a key numbers man for the Prime Minister in last August’s leadership contest — yesterday used question time to declare the NDIS was available to “all Australians on the continent”….. [my yellow highlighting]

AMA accuses Morrison Government of deliberately constraining supply of public hospital services

ABC News, 24 May 2019:

"Have you got insurance?"

It is one of the first questions any patient is asked when they walk into an emergency room in the United States, no matter how sick they are.

And now Australian doctors are warning our own health system is shifting towards a similar US managed care model — a patchwork of private and public systems, where health insurers hold an increasing amount of power.

The president of the Australian Medical Association (AMA), Dr Tony Bartone, made the comments as he addressed the group's national conference in Brisbane on Friday.

It was the first time Dr Bartone has spoken since the Coalition was returned to power, and he gave an unusually scathing assessment of Australia's health system and the Federal Government.

He called for further private health reforms, telling doctors the increasing corporatisation of the private health system had given insurers unprecedented power within the health sector.

Dr Bartone warned that could lead to a system similar to the model in the US, where patients experience significant variations in care depending on their insurance cover.

"Insurers should not determine the provision of treatment in Australia, they should not interfere with the clinical judgement of qualified and experienced doctors," he said.

"Australians do not support a US-style managed care health system, and neither does the AMA."

The AMA has consistently called for more money for public hospitals, and on Friday Dr Bartone went even further as he accused the government of "making a choice" to constrain the supply of public hospital services.

"Let me be clear. Public hospital capacity is determined by funding," he said.

"The consequences are significant. They can include increased complications, delayed care, delayed pain relief, and longer length of stay for admitted patients."

Dr Bartone said the system was "stretched so tight" elective surgeries were being cancelled.

"Our public health system should be better than this. It is unacceptable our public hospitals have been reduced to this," he said.

"Our public hospitals are struggling and require new funding to be better tomorrow.....

Insurance industry continues to warn that ability to insure property may breakdown due to ongoing impacts of climate change

The Guardian, 22 March 2019:

Insurers have warned that climate change could make cover for ordinary people unaffordable after the world’s largest reinsurance firm blamed global warming for $24bn (£18bn) of losses in the Californian wildfires.

Ernst Rauch, Munich Re’s chief climatologist, told the Guardian that the costs could soon be widely felt, with premium rises already under discussion with clients holding asset concentrations in vulnerable parts of the state.

“If the risk from wildfires, flooding, storms or hail is increasing then the only sustainable option we have is to adjust our risk prices accordingly. In the long run it might become a social issue,” he said after Munich Re published a report into climate change’s impact on wildfires. “Affordability is so critical [because] some people on low and average incomes in some regions will no longer be able to buy insurance.”

The lion’s share of California’s 20 worst forest blazes since the 1930s have occurred this millennium, in years characterised by abnormally high summer temperatures and “exceptional dryness” between May and October, according to a new analysis by Munich Re.

Wetter and more humid winters spurred new forest growth which became tinder dry in heatwave conditions that preceded the wildfires, the report’s authors said.

After comparing observational data spanning several decades with climate models, the report concluded that the wildfires, which killed 85 people, were “broadly consistent with climate change”.

Nicolas Jeanmart, the head of personal insurance, general insurance and macroeconomics at Insurance Europe, which speaks for 34 national insurance associations, said the knock-on effects from rising premiums could pose a threat to social order.

“The sector is concerned that continuing global increases in temperature could make it increasingly difficult to offer the affordable financial protection that people deserve, and that modern society requires to function properly,” he said.

Climate Change creates risks for Australia’s financial stability warns Reserve Bank deputy governor

The Guardian, 12 March 2019:

A deputy governor of Australia’s central bank has issued a stark warning that climate change poses risks to financial stability, noting that warming needs to be thought of by policymakers and business as a trend and not a cyclical event.

As a debate over coal and energy fractures the Morrison government, Guy Debelle warned a forum hosted by the Centre for Policy Development on Tuesday that climate change created risks for Australia’s financial stability in a number of different ways.

“For example, insurers may face large, unanticipated payouts because of climate change-related property damage and business losses,” he said. “In some cases businesses and households could lose access to insurance.

 “Companies that generate significant pollution might face reputational damage or legal liability from their activities, and changes to regulation could cause previously valuable assets to become uneconomic.

“All of these consequences could precipitate sharp adjustments in asset prices, which would have consequences for financial stability.”

Debelle noted Australia had traditionally come at the climate change debate largely through the prism of its impact on agriculture, but he said the changing climate created “significant risks and opportunities for a broader part of the economy than agriculture – though the impact on agriculture continues to be significant”.

He said policymakers and businesses needed to “think in terms of trend rather than cycles in the weather”.

“Droughts have generally been regarded, at least economically, as cyclical events that recur every so often. In contrast, climate change is a trend change. The impact of a trend is ongoing, whereas a cycle is temporary.”

He said there was a need to reassess the frequency of climate change events, and “our assumptions about the severity and longevity of the climatic events”.

He said the insurance industry had already recognised the frequency and severity of tropical cyclones and hurricanes in the northern hemisphere had changed, and this reassessment had prompted the sector to reprice how they insure and reinsure against such events.

“We need to think about how the economy is currently adapting and how it will adapt both to the trend change in climate and the transition required to contain climate change,” Debelle said.

He said the transition path to a less carbon-intensive world was “clearly quite different depending on whether it is managed as a gradual process or is abrupt”.

“The trend changes aren’t likely to be smooth. There is likely to be volatility around the trend, with the potential for damaging outcomes from spikes above the trend.”

Debelle noted the United Nations’ Intergovernmental Panel on Climate Change had provided “strong evidence” that another half degree of warming was likely in the next 10 to 30 years.

He said work from the Bureau of Meteorology and the CSIRO pointed to an increase in the frequency of extreme weather events, and noted “extreme events may well have a disproportionately large physical impact”.

“There is also a greater possibility of compound events, where two or more climatic events combine to produce an outcome that is worse than the effect of one of them occurring individually,” Debelle said.

“Combined with the increased volatility, this increases the likelihood of nonlinear impacts on the economy.”

Debelle said assessed through that lens, climate change-induced shocks to the economy would be “close to permanent” if droughts were more frequent and cyclones happened more often. “That situation is more challenging to assess and respond to.”

On 13 March 2019 ABC News reported that a leading climate analyst warns that extreme weather risks mean nearly 1 in 10 Australian houses may be uninsurable due to climate change within the next few generations, that is in est. 30-90 years.

The climate change risk coastal towns and villages don't discuss enough

Financial Review, 15 November 2018:

Insurance giant IAG has warned a failure to reduce greenhouse gas emissions could result in a world that is "pretty much uninsurable", with poorer communities likely to bear the brunt of the effects.

In Australia, IAG said temperature increases of more than 3 degrees would expose greater swaths of Queensland to cyclones and flooding, while a rise of more than 4 degrees could make the risks to insurers prohibitive.

Timaru Herald, 26 May 2018, p.7:

Anyone now considering a coastal property should know what sea level rise is.

If they already own one, they shouldn't be surprised if buyers expect to know how it might affect them.

It's time to accept these properties may come with some risk, and let government and other agencies get on with the job of preparing without worrying about court battles over lost capital gains.

It's an inconvenient truth, but it appears that the value of flood- prone property will go down and many coastal towns will face a new threat.

The Sydney Morning Herald, 14 February 2018:

If any Australian company needs to come clean over its climate risks, it’s QBE.

Not just so shareholders can understand how secure (or not) their capital is as climate impacts intensify.

This is about Australians being able to see just how perilous our future has become without urgent action to cut greenhouse gas emissions.

Last October QBE said it expected 2017 to be the costliest year in the history of the global insurance industry, flagging a $US600 million ($767 million) hit to its pre-tax earnings. They weren't wrong, nor were they alone.

The triple-whammy of hurricanes Harvey, Irma and Maria hitting the US and Caribbean contributed to a record $US135 billion in payouts globally on natural disasters. Wildfires in California made things worse and, for Australian general insurers, Tropical Cyclone Debbie added to the pain.

Tom Herbstein, of Cambridge University’s insurance industry-funded project ClimateWise, summed it up in saying “climate change fundamentally challenges the existing insurance business model.”

And understandably there have been some drastic responses from within the industry. Hannover Re was even forced to sell its entire stock portfolio, worth €953 million ($A1.5 billion) , prompted by natural disaster claims.

Costly natural hazards are nothing new to QBE or indeed any of Australia’s big three general insurers.

Last year, individual large claims and natural hazards cost QBE $1.7 billion, or 15 per cent of the company’s net earned premium.

Compare this to the seven year average of 8.1 per cent to 2010, and you get an idea why QBE called it “unprecedented”.

Additionally, over the past decade, IAG under-provisioned for natural hazard claims by almost $1 billion while Suncorp under-provisioned by $1.9 billion.

It appears none of our general insurers are keeping up with the pace of climate change.

BACKGROUND

Excerpt from the Insurance Council of Australia’s Climate Change Policy:

The role of general insurance is to assist policyholders to recover from losses, such as those caused by extreme weather events. With expertise in risk management developed over hundreds of years of operation, general insurers play a critical role in communicating, managing and responding to the the risks that many policyholders face today, as well as how those risks may evolve under a changing climate.

It follows that the general insurance industry naturally supports community policy adjustments that will enhance resilience to extreme weather, as well as measures that may assist to reduce emissions.

Using the industry’s expertise in the pricing, transfer and management of risk, the following activities being undertaken by the industry are intended to assist policy-makers and communities to address the implications of climate change:

Maintain the strong prudential foundations underpinning the Australian market, to ensure that the industry continues to be able to respond to large disaster events when they occur.

Manage the commercial, individual and community-level risks posed by climate change via innovative risk-transfer solutions.

Ensure that risk-transfer solutions deliver competitive price signals, through risk based pricing, that assist communities and decision makers to recognise and adapt to current and emerging extreme weather risks.

Assist to increase community resilience over time by sharing industry expertise that will help policy decision makers and the community to:

Reduce exposures by making development control decisions for exposed locations that are appropriate for both the location and the planned life cycle of the development, accounting for the increased risk posed by the changing climate.

Reduce vulnerability to natural disasters by implementing localised defensive infrastructure where necessary to achieve an acceptable residual risk of damage to an exposed community.

Reduce vulnerability to natural disasters by improving building codes to ensure that built structures remain viable following predictable events over their planned life cycle, accounting for the increased risk posed by the changing climate.

Assist policy-makers to understand the long term economic implications of climate change, as well as the benefits of any appropriate emission mitigation schemes, by providing credible data on current exposures and vulnerabilities, as measured by the general insurance industry.

Assist to implement practical solutions to emission reduction strategies, through the consideration of risk-transfer products that incentivise solutions to be brought to market by other industries.

This policy was approved by the ICA's Board on August 4, 2016.

Coast Adapt, 2015:

Climate change threatens the viability of insurance in Australia and across the globe.

Despite a number of recent ‘quiet’ years, a trend of increasing losses is apparent in Australia and globally due to extreme weather events.

Insurers are covering at a loss some parts of Australia that are considered disaster-prone.