APRA Calls for Immediate Action on Extreme Weather Risks
Understanding the Implications for Australia's Insurance Sector
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The Australian Prudential Regulation Authority (APRA) has released a landmark report emphasising the urgent need for ambitious action and investment to shield communities from the escalating impacts of extreme weather events.
The Insurance Climate Vulnerability Assessment (ICVA) serves as a stress test, highlighting risks that are already materialising and supporting the insurance industry's calls for immediate mitigation efforts.
Worsening extreme weather, combined with inflationary pressures, rising asset values, and insurance taxes, is widening the gap between those who can and cannot access insurance in high-risk areas. Although the number of properties currently impacted by severe and extreme risk is relatively low, the cost of repairing and rebuilding these properties is significant. For instance, analysis by Aon indicates that 25% of the cost of repairing or rebuilding properties damaged by floods is driven by just 11% of the most at-risk properties.
The report underscores the necessity for collaborative efforts between the government, insurance industry, and communities to implement effective mitigation strategies. This includes investing in resilient infrastructure, updating building codes, and enhancing emergency response capabilities. Such proactive measures are essential to reduce the financial and social impacts of extreme weather events on Australian communities.
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