Australia Weather News

A major insurer is warning Australians to expect rising home insurance premiums, in part due to increasingly frequent and damaging weather events. 

A report from IAG found the risk to communities has increased as the climate warms, with severe storms, including hailstorms, predicted to hit the most populated regions in the southern parts of Australia.

IAG's chief financial officer William McDonnell told The Business that climate change would play an increasing role in the rising premiums unless urgent actions were taken.

"The price of insurance is driven by a whole range of factors, including the costs of repair, which have been increasing, regardless of natural perils.

"But the component that relates to natural perils … that is gradually increasing, particularly in the areas that are more exposed or becoming more exposed to these perils."

Mr McDonnell said the insurance group, which includes the NRMA Insurance and CGU brands, has "very strong reinsurance protection", however, which would "stabilise and moderate" the impact of such events on premiums.

Hail a rising risk to populated areas

The Severe Weather in a Changing Climate report, published by the insurer and the US National Science Foundation's National Centre for Atmospheric Research, said severe convective storms, including hailstorms, were among the most frequent and damaging weather hazards in Australia.

Those hazards produce extreme wind gusts, large-to-giant hail, tornadoes and intense short-duration rainfall, according to the report.

Over the weekend, south-east and southern Queensland were lashed by two days of giant hail of up to 8 centimetres, with nine people injured on Saturday.

According to the Insurance Council of Australia, more than 2,500 claims have been made as a result of the storms.

"Recent research shows a noticeable rise in large hail events, particularly in major urban areas, with evidence suggesting a southward expansion of hail-prone regions and more hail days along the Melbourne–Sydney–Brisbane corridor," the report said.

"Atmospheric conditions have become increasingly favourable for hail over the past 30 years in Australia's most densely populated regions."

More extreme natural events observed

Mr McDonnell told The Business that natural events in Australia were becoming more intense, at both ends of the weather spectrum.

"We can see that storms accelerate faster, " he said.

"Strangely, things are getting both wetter and drier, so we expect the droughts are worse.

"There are fewer mild rainy days, but there are going to be more intense downpours."

The report found bushfire weather risks were escalating rapidly as climate change drives hotter, drier and more fire-prone conditions, faster than climate models have predicted.

"Rising temperatures are leading to more days with extreme weather conditions conducive to uncontrollable bushfires, while shifting rainfall patterns are reducing soil and fuel moisture in some areas, creating continuous, fire-supportive landscapes," the report read.

"The frequency of heatwaves combined with dry conditions is expected to rise, significantly increasing the number of extreme fire weather days and, as a result, the intensity of bushfires."

Tropical cyclones have been forecast to "potentially become windier and wetter", and to likely maintain intensity further away from the tropics, leading to escalating risk in south-east Queensland, New South Wales and south-west Western Australia, where buildings are not built to withstand mid-to-high-end category cyclones, the report found.

Since 2020, Australia has experienced 14 declared catastrophes and eight significant weather events.

The insurance industry has paid $22.5 billion in insured costs for extreme weather events over the past five years, an increase of 67 per cent on the previous five years, according to the Insurance Council of Australia.

The most recent catastrophic weather event, ex-tropical Cyclone Alfred in March, impacted south-east Queensland and north-east NSW and resulted in 129,000 claims, $1.4 billion insured losses and $1.2 billion in federal government recovery costs.

Meanwhile, global mean sea surface temperatures increased by 1.15 degrees Celsius above pre-industrial levels in 2024, with the risk of rising sea levels around Australia to become a growing issue by mid-to-late century, according to the report.

"The higher the rate of greenhouse gas emissions, the more quickly these trends will evolve, acting as a chaotic and pervasive risk multiplier placing more people and property at risk," it said.

Calls for 'collective and urgent action'

IAG has called for urgent action to improve the resilience of buildings and infrastructure to reduce risks in the long run.

"As well as doing our part to transition to a low carbon economy and help to reduce the whole problem [climate change], what's very important is we take the steps that we need to in Australia to reduce the risks and help Australia adapt and be resilient in the face of this," Mr McDonnell said.

"Whether that's improving building codes for all of the natural perils that could happen through the life of a building … whether it's about land use planning, whether it is about deciding which flood defences to build or not build."

James Done from the US National Science Foundation's National Centre for Atmospheric Research, which co-authored the report, said climate change required a collective and urgent effort from business, industry, government, communities and individuals.

"We now know the warming and moistening of our atmosphere, driven by increasing emissions, is a key driver of the uplift in volatile weather," Dr Done said.

"Our challenge is to work together to integrate scientific understanding with risk mitigation and adaptation strategies."

To help drive the transition to net zero in Australia, the Labor government has set a target to reduce emissions to 62–70 per cent below 2005 levels by 2035 and to reach net zero emissions by 2050.

The target is the source of major political ructions within the Coalition as the Nationals formally abandon their commitment to reach net zero by 2050.

When asked if insurance companies talk up climate risk to cushion the blow of higher premiums for customers, Mr McDonnell said it was "important that insurance companies are strong", but that IAG had been "a champion of climate action" for more than 20 years.

"We've sponsored this research before, we're updating it now, and we think that's the right thing to do for our communities, for Australia to be able to be prepared for what we know is the increasing weather risks that are coming."

The report suggested that the governments should establish consistent state and federal guidelines on natural hazard risk tolerance.

It also supported a national property-level hazard database to inform development decisions and building codes that reflect changing hazard profiles, ensuring long-term durability.

Major infrastructure should be planned with a 100-year horizon to accommodate climate projections, the report said.