Australia: Who will bear the financial risk of climate-related disasters?
By Rosemary Lyster and Terry Carney
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The financial risk is huge. The total cost of the current fires - which have already burnt 25 times the area of the Black Saturday fires - has been estimated at around $230 billion. This includes tangible and intangible costs. Tangible costs include the human lives, homes, schools, businesses, infrastructure (electricity and telecommunications, for example), vehicles, crops, fodder, and farm animals (100,000 sheep alone on Kangaroo Island and 25,000 animals on the mainland) that have been lost and destroyed. This is without counting the cost of the 1.25 billion native animals and hundreds of billions of insects which are estimated to have died, or the lost ecosystems.
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Climate extremes now expose the limitations of government and insurers to meet these costs. Let's talk first about governments. Governments have a duty to citizens to reduce exposure to the risk before it occurs, and to providepost disaster assistance. However, in the case of these bushfires, we read reports of how no substantial action was taken by the Morrison government over the past 18 months to implement the 2018 National Disaster Risk Reduction Framework, and that Scott Morrison ignored the warnings about the impending bushfire disaster.
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What about insurance? On the one hand many property owners are not insured and, on the other hand, insurers have issued embargoes on providing insurance in bushfire-ravaged areas. Despite this, insurers have sought to reassure the public that they have the capacity to cover the current bushfire insurance costs - but, given the low level of insurance, only a small proportion of these losses will be covered.
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Clearly government needs to shoulder more responsibility for compensating victims of disasters - especially those already vulnerable. How and whether our native wildlife and ecosystems will ever recover and who will bear that cost is an unfolding crisis. The $40 million included in the government's bushfire recovery package and the funds raised by non-governmental organisations are only the start.