Extreme weather events are costing Australia’s insurance sector a staggering $4.5 billion annually, triple the amount recorded three decades ago, according to new research.
The Insurance Council of Australia (ICA) warns that population growth in flood-prone regions and infrastructure not designed to withstand climate change has left large areas of the country exposed to escalating risk.
During the 2020s, insurers have paid out an average of $4.5 billion per year in claims. In 2025 alone, nearly $2 billion in losses resulted from three major insurance catastrophes: the North Queensland floods ($289 million), ex-Tropical Cyclone Alfred ($1.43 billion), and the NSW Mid North Coast and Hunter floods ($248 million).
Analysis by global reinsurer Munich Re indicates that financial losses from extreme weather have tripled since the 1990s, even after adjusting for inflation. ICA Chief Executive Andrew Hall said, “While Australia has always faced extreme weather, the accelerating losses per person and their compounding impact on communities is costly and ongoing.”
Australia is racing to improve the resilience of its built environment, as decades of underinvestment have left households to shoulder an outsized economic burden. Since the 1980s, the country has incurred higher economic costs from extreme weather per person than France, Germany, or Canada. For most of the past 45 years, Australia ranked second only to the US in economic and insured losses per capita, dropping to third place in the 2020s due to two exceptional weather events in New Zealand.
The report also highlights the vulnerability of certain communities to floods. Of the 242,000 Australian homes most at risk of flooding, 186,000 lack insurance. These homes are typically occupied by residents earning below the national median, drawn to lower-cost properties in high-risk areas.
“There’s a clear correlation between high flood risk and socioeconomic disadvantage, with our country’s most vulnerable least likely to have an insurance safety net when disaster strikes,” the ICA report concluded.
