The Insurance Council of Australia (ICA) and the California Department of Insurance (CDI) have formed a partnership to tackle the challenges posed by climate change, focusing on wildfire and flood risks.
Supported by the American Chamber of Commerce in Australia (AmCham), the two bodies held a summit in Sacramento on Thursday (25 July 2024). The event aimed to address the increasing insurance protection gap, highlight best practices, and explore joint efforts to improve disaster preparedness and resilience.
Australia and California share similar natural hazard risks, regulatory environments, and economic structures.
“Over the past decade, residents of both jurisdictions have borne the brunt of devastating extreme weather events at significant cost to lives and property,” the ICA and CDI said in a joint media release.
“Combined with the growing value of assets, expanding cities and inflation, this has placed great strain on the insurance sectors in both jurisdictions, worsening insurance availability in areas at high-risk of extreme weather,” the industry bodies added.
Climate change is expected to prolong fire seasons and intensify flooding in both regions, worsening the insurance protection gap. The summit aimed to build on a history of bilateral collaboration in disaster management, climate risk, and clean energy.
A “historic” climate and resilience partnership
In its statement, the ICA and CDI said the summit resulted in key sharing of information and ideas around key topics, namely: global best practices for disaster preparedness, insurance and government partnerships, an inter-country partnership, and the growing protection gap.
The Insurance Council of Australia and California Department of Insurance
The summit highlighted best practices in preparing for, responding to, and mitigating fires and floods, the ICA and CDI said. This included the importance of shared firefighting resources—which are under pressure as disaster seasons overlap—investment in mitigation, resilience, building standards, and land use planning were identified as crucial for improving long-term insurance availability.
The need for joint efforts between the insurance industry and governments to close the protection gap and improve insurance availability was also a key issue that was discussed. “Bringing together industry and government expertise can accelerate a shared view of current and future hazard risk and provide opportunities for collaboration,” the industry bodies said.
The ICA and CDI said they are committed to a historic climate and resilience partnership. The partnership aims to build a shared view of growing risks and solutions based on common climate risks.
The summit also considered the global phenomenon of the widening protection gap and rising pressure on premiums. Both the US and Australian markets are experiencing an increasing gap between those who can afford insurance in high-risk areas and those who cannot.
“Putting downward pressure on premiums requires a full toolkit of solutions that drive down risk,” the ICA and CDI said.
The ICA will continue its global engagement by hosting international leaders at a National Conference in Brisbane in October 2024.
