Recipe for disaster

Australia is often called the Lucky Country, but not when it comes to its vulnerability to natural disasters. So what is being done to preempt and relieve the inevitable economic costs of such disasters?

While putting a price tag on the human suffering from natural disasters is impossible, the Department of the Prime Minister and Cabinet recently estimated that they cost Australian taxpayers around $18.2 billion a year. This is predicted to rise to $39b a year by 2050, even without the increased frequency and intensity of weather events due to climate change.

Even under a low-emissions scenario, the Australian Business Roundtable for Disaster Resilience and Safer Communities estimates the costs will surge to $73b a year by 2060. But under a high-emissions scenario — where emissions reach 3° Celsius above pre-industrial levels just after 2060 — the estimated cost per year is $94b.

One of the roundtable’s key recommendations for minimising the economic costs and social impacts of natural disasters is a collaborative approach involving government, business, not-for- profits (NFPs) and the community.

The roundtable is itself a collaboration, formed in December 2012 by groups such as the Australian Red Cross, Insurance Australia Group (IAG), Investa Property Group, Munich RE, Optus and Westpac.

“Partnerships are critical because the whole natural disaster hazards bucket can’t be solved by any one sector on its own,” says Dr Richard Thornton GAICD, CEO at Natural Hazards Research Australia (NHRA). “It can’t be solved by government just throwing more money at it or by the private sector doing things on its own.”

Again, NHRA is also a partnership organisation, sitting between academic researchers and universities and end-user organisations in government and the private sector.

Thornton notes that a wide range of parties is involved in dealing with natural disasters, including the federal, state and local governments, the private sector, state emergency services, fire and police services, community support groups and the communities at risk.

“It’s essential for all actors — whether they are corporations, NFPs or government departments — to work together in close coordination with disaster-exposed communities,” says Philip Sen, community development manager (bushfire resilience) at Habitat for Humanity Australia. “We value listening and reflection as much as mobilising volunteers into action. Going forward, we want to understand the long-term needs and issues that communities face and find long-term sustainable solutions. There’s no substitute for the decades of experience local people have acquired in meeting the increasing challenges of living with bushfires, floods and cyclones. While local knowledge is crucial, as natural disasters increase in frequency and intensity, it’s just as essential for resources and expertise to be directed to those communities in a smart manner that meets local needs and fills resource and expertise gaps. Disaster resilience is only possible when leveraging the insights of all partners.”

Many reports, little follow-through

A partnership was responsible for developing the National Disaster Risk Reduction Framework, which Thornton describes as a leading piece of work for addressing some of the emerging risks from climate change. A multi-sector collaboration led by the National Resilience Taskforce within the Department of Home Affairs, it was co-designed with representatives from all levels of government, business and the community sector. A three-day intensive “policy sprint” in June 2018 attracted more than 100 participants from over 80 organisations.

“The framework and its action plans across the states and territories are a major step forward from where we were 10 years ago,” says Thornton. “It does talk about the need to solve this as a partnership between all sectors.”

A lot of work has been done on the risks and mitigation of disasters with federal and state governments announcing inquiries after many a devastating event. For example, state inquiries into this year’s catastrophic floods are underway in NSW and Queensland.

Indeed, the report of the Royal Commission into National Natural Disaster Arrangements — established after the 2019–20 extreme bushfire season — noted there had been more than 240 formal inquiries and reviews in Australia related to natural disasters since 1927. The report stated: “Collectively, these reports have made thousands of recommendations and findings.” However, many of these recommendations have only been partially implemented — or not implemented at all.

One issue, says Thornton, is that it’s easy for inquiries to take a step back and look at what went wrong, so the recommendations tend to be on what goes wrong, rarely commenting on what went right.

“One of the challenges we have is that we’re constantly reacting to events as they happen,” says Thornton. “We are doing the work in so- called peacetime and that is quite hard. We have to have a solution that sees us investing more in mitigation, which will have a consequential impact further down the chain in some years’ time. That’s a challenge because you’ve got to spend money today for potential savings in the future while you’re still spending money on recovering from a big event. That becomes a double whammy for whoever’s spending the money. We need leadership who can see through that.”

Proactive partnerships

Since the start of 2022’s devastating floods, the Insurance Council of Australia (ICA) has been working with a range of industry bodies, government agencies, its members and other stakeholders to assist in any way possible.

However, the ICA notes that some basic changes need to be made in how we regard land use. “Beyond the immediate clean-up and ongoing community recovery, it’s imperative that a preventative approach is embraced. This should give consideration to the construction of community mitigation infrastructure such as levees, the future insurability and lendability of homes and businesses, land use planning, land use decisions by major commercial residents and building codes and standards. Without a change in approach to what we build and where we build it, coupled with increased funding to make Australian homes and businesses more resilient to extreme weather, the risk profile of communities exposed to extreme weather will not change.”

With a lot at stake from natural disasters and climate change, insurers tend to be particularly involved in partnerships. One example is Suncorp.

“Effective climate response can’t be achieved in isolation,” says Suncorp government and community manager Sallyann Innes. “Suncorp partners with a range of expert community groups to enhance our own data and insights on resilience so we can better inform our decision-making and manage growing risks in vulnerable areas.”

For example, Suncorp is the principal community partner of the Queensland SES. It has also partnered with the Firesticks Alliance Indigenous Corporation to build capacity in mitigating disasters before they occur in bushfire-prone areas. And its subsidiary, AAMI, has been the principal community partner of the Victorian SES for almost 20 years.

Fellow insurer QBE works through the QBE Foundation to improve the resilience and preparedness of communities.

“We do this mainly through long-term partnerships, but also have employee engagement programs, local grants and emergency support initiatives,” says Jon Fox, chief claims officer at QBE Australia Pacific and co-chair of the Australia Pacific QBE Foundation. “We have a global disaster relief and resilience partnership with Red Cross and Save the Children, which continues to be critical to our ability to support communities to prepare for and respond to disasters. Across our global operations, we’re also working with our partners to support and create local initiatives that support climate resilience and inclusion priorities.”

Fox says the QBE Foundation makes financial contributions to its various community partnerships. During the recent floods on the NSW east coast, for example, it contributed $225,000 to disaster support initiatives by community partners such as the Australian Red Cross, Save the Children and Foodbank Australia.

The QBE Foundation also partners with global NFP Leading Cities to run the QBE AcceliCITY Resilience Challenge, a global competition seeking entrepreneurs whose ventures drive resilience in cities. “Through this challenge, we’re looking to find and collaborate with creators of innovative solutions for city ecosystems that will help us build thriving and resilient cities,” says Fox.

Meanwhile, insurance broker Aon relies on partnerships to produce its risk analytics products. “From our perspective, aligning everything we do in terms of risk-based analytics associated with climate hazards has to be underpinned by peer- reviewed Australian science, so we closely interact with partners from the leading science community, such as CSIRO, Bureau of Meteorology and the ARC Centre of Excellence for Climate Extremes,” says Peter Cheesman, head of APAC analytics at Aon. “This means that when we bring solutions to insurers, they know they are based on current science. For instance, our bushfire risk rating tool is peer-reviewed by the CSIRO, so we’re confident that our ratings are in line with how they perceive the risk.”

So what stands in the way of forming more disaster resilience partnerships?

“When it comes to public-private partnerships, there is quite often a disconnect because of budget and policy,” says Cheesman. “For instance, the private sector can quickly provide the monetary cost savings to a community by implementing some form of mitigation, but often the public sector does not have the budget —or even the power — to implement the scheme in an adequate time frame.”

Insurance vs risk

The insurance industry has a lot to gain by getting involved in collaborations that improve resilience to natural disasters. This is because one of the side effects of climate change-related disasters is the escalating problem of insurance unaffordability, especially for those in high-risk areas.

This could happen if insurance claims exceed the premium pool after a disaster, forcing insurers and reinsurers to pull back capacity and hike up premiums in order to remain sustainable. Insurers have also become much better at modelling risk with more granular data and are better able to price the premiums in risky areas.

According to the ICA, there is no area of Australia that is uninsurable, although there are some locations where there are clearly affordability and availability concerns. To create a long-term, sustainable market for insurance, the ICA says more must be done at all levels to lower the physical risks by improving resilience standards in building codes, yhgbreforming unfair state insurance stamp duties and levies, and making better land-planning decisions into the future that factor in the climate impacts.

Thornton believes the better pricing of premiums by insurers sends a price signal to the market. “If you’re starting to see your insurance premiums go up as a householder, then maybe that’s telling you something about where you live and that you might want to do some things to reduce your risk,” he says.

He believes the insurance industry will be open to any risk-reduction steps residents take. “We saw that in the north of Australia when there was a program run by the Queensland government to retrofit buildings in cyclone-prone areas,” he says.

Queensland’s regional Household Resilience Program for cyclone-affected areas, funded by both the state and federal governments, initially helped 1749 households from Bundaberg to the Cape reduce their insurance premiums by an average of $310.

Another approach many governments have used to tackle insurance unaffordability is by forming reinsurance pools. In March 2022, the Australian government passed legislation for a reinsurance pool for cyclone and cyclone-related floods in northern Australia. It will be backed by a $10b, annually reinstated, Commonwealth guarantee and administered by the Australian Reinsurance Pool Corporation from 1 July 2022. It is expected to reduce insurance premiums by up to $2.9b over 10 years. Homeowners in northern Australia with the most acute cost pressures are expected to benefit from up to 46 per cent premium discounts, strata properties up to a 58 per cent discount and small-to-medium- enterprises (SMEs) up to a 34 per cent discount.

“A reinsurance pool is just one lever available to influence premium prices in cyclone-impacted regions of Australia,” says the ICA. “The private insurance market has served Australia well for many years and in our view, mechanisms like a flood reinsurance pool are not required at this time as there are other options available to better protect homes and communities and put downward pressure on premiums.”

Thornton says pools are not always a silver bullet, suggesting reinsurance might be a better way to go. “That’s why we need partnerships [to provide] new knowledge, and discussion points to have the conversations about the different ways of solving this problem,” he says. “But we also need the leadership because, as we’ve seen, the natural hazards area quickly becomes political with a capital P — and a position for points-scoring between the parties.”

Ipswich, Queensland

A primary focus of the Ipswich City Council review into the devastating floods that hit the region in February 2022 was the importance of collaboration. This year’s mass flooding event required a full-scale response from all levels of government, community organisations, businesses and individuals, says Ipswich mayor and Local Disaster Management Group chair Teresa Harding. “We want to understand what worked, what needs improvement and how we can all work together when faced with adversity.”                                  

Ipswich is no stranger to natural disasters. Its subtropical climate makes it susceptible to weather that can cause flooding, usually in summer, when it typically receives half its average annual rainfall.

As the waters rose this year, Harding says the community came together with a full multi-agency response that included all levels of government and a range of organisations, from national to local level. Ipswich residents supported each other by cooking meals, bringing cleaning supplies and their labour, donating their time and welcoming flood-impacted family and friends into their homes.

“Partnerships are vital in mitigating the risks and building community resilience to natural disasters,” says Harding.

“There’s no single solution and no single agency that can achieve community resilience alone. We all need to work together, bringing our individual strengths and skills into the mix.”

One resilience-building partnership helps people with disabilities prepare for disasters. “We joined forces with the Queenslanders with Disability Network, the University of Sydney and the Queensland government to promote disability-inclusive disaster risk reduction,” says Harding. “At the last census, 17 per cent of Ipswich residents reported having a disability or caring for someone who does. This partnership is all about supporting the members of our community who are particularly vulnerable.”

The partnership includes a practical interactive session for people with a disability, their carers and supporters on how to start an emergency preparedness plan tailored to their capabilities and specific support needs.

“We had Ipswich resident and advocate for the disability community, Peter Tully, do this resilience-building plan,” says Harding. “He shared that he had bought a gas barbecue, so even if the power goes out in a storm, he can still boil water and cook food. It’s a simple action, but one that has immediately made him better prepared for what he might experience in the event of a natural disaster. Those types of simple actions, replicated across our communities, will help minimise the economic and social costs of natural disasters.”

But even with all possible resilience building and planning, disasters are unpredictable and always create new challenges.

“We found this following the devastating hail storm that hit our city in October 2020,” says Harding.

“The YMCA Springfield Lakes Community Centre suddenly became the recovery centre for the region, with multiple agencies establishing a presence and the building becoming a distribution point for much-needed community resources. It was a role the YMCA had never experienced before, but it did an incredible job... Over 13 days, 2300 people accessed the centre, 60 volunteers provided support, and about 10 agencies and multiple small businesses cooperated to support the community.”