Queensland Flood Damage Within Capacity of Insurers

January 10, 2011, 3:31 AM EST

(Updates with Toowoomba death in sixth paragraph.)By Jacob Greber

Jan. 10 (Bloomberg) -- Insured losses triggered by flooding across Queensland are “modest” and well within the capacity of the nation’s insurance companies, said Robert Whelan, chief executive officer of the Insurance Council of Australia.

“Although this is a very major weather event, from an insurance point of view it’s still fairly moderate,” Whelan said in an interview with Bloomberg News today in Sydney. “While this is still significant, it’s not one of the more major events we’ve had to deal with over the last 12 months.”

Queensland is experiencing its worst floods in 50 years, forcing the evacuation of 4,000 people and affecting about 1 million square kilometers (386,000 square miles), or an area the size of France and Germany. Whelan reiterated the Insurance Council’s preliminary estimate that insurers may pay out A$150 million ($150 million) from 4,300 claims received.

“By way of comparison, the industry received 161,000 claims for A$1 billion in losses after one 20 minute hail-storm in Perth,” Whelan said. Many homes in the flood zones aren’t insured, and damage caused by water normally costs less to repair than bush fires which require dwellings to be replaced, he said.

Still, claims are likely to continue growing in coming weeks as heavy rain over southeast Queensland worsens flooding in regional towns including Gympie, Maryborough and Dalby, and threatens to affect parts of the capital of Brisbane.

A woman is dead and three pedestrians are missing in Toowoomba after a torrent of rain swept them from a road, Queensland Police said on its website today.

Early Claims

Suncorp Group Ltd. said Dec. 31 that it had received about 1,450 claims from across Queensland state since Christmas Eve from customers affected by the floods and that it expected numbers to increase as waters recede and people return to their homes. Insurance Australia Group Ltd. said Jan. 4 it has received about 600 claims stemming from floods in Queensland and that it’s too early to estimate the final cost of the claims.

Suncorp shares have declined 4 percent since Dec. 24, while IAG has slipped 1.3 percent. The benchmark S&P/ASX 200 index has lost 1.4 percent in the same period.

A torrent of rain in the 24 hours through 5 a.m. local time will push the Mary River at Gympie to a “major flood level” of above 20 meters (66 feet) tomorrow, the Australian Bureau of Meteorology said on its website today. Upstream at Maryborough levels peaked at around 8.2 meters yesterday, and may climb again if heavy rainfall continues.

Damage to the state’s transport network currently stands at around A$1.5 billion, Queensland Roads Minister Craig Wallace said today.

Dollar Weakens

“Frankly, we just don’t know the final impact yet,” Wallace said in an e-mailed statement. “Very few stretches of road have been left untouched by weakened surfaces, potholes, verges and road base washed away or more serious structural damage.”

Southeast Queensland Water will release water from Wivenhoe Dam above Brisbane, causing minor flooding in the city’s outer suburbs of Savages and Mt Crosby, with “moderate flood levels” expected overnight, the weather bureau said.

Australia’s dollar was near a three-week low as the flooding continued.

Authorities have also issued a flood warning for Dalby, a town about 210 kilometers (130 miles) west of Brisbane.

Lost Exports

Queensland Premier Anna Bligh has estimated the bill from the disaster, which has closed mines and spoiled crops, may be more than A$5 billion. The state is Australia’s largest coal exporter and accounts for about 20 percent of the nation’s A$1.3 trillion economy.

Rabobank cut its Australian raw sugar production forecast for 2011-2012 by 10 percent to 3.8 million metric tons, the bank said in an e-mailed report today.

The region is losing A$480 million a week in lost coal exports, said Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne. About 160 million metric tons of annual coal production has been halted under force majeure contract clauses, equivalent to 41 percent of the world’s export coking coal supply, and 8 percent of global export thermal supply, he said.

At least 11 people have died in floodwaters in the past few weeks and an estimated 200,000 people in the state have been affected, according to Queensland police. Police said a 19-year- old woman drowned Jan. 8 while swimming in a swollen creek.

The federal government has received over 8,000 claims for emergency assistance, with over A$10 million paid to people, Prime Minister Julia Gillard told reporters in Canberra today.

‘Doing it Tough’

The government will also subsidize those whose salaries have been cut because of floods, Gillard said. “We’ve seen extreme weather events in many parts of the country. There are a lot of Australians doing it tough facing very stressful circumstances.”

Australia had its third-wettest year on record in 2010, according to the weather bureau, which says showers and storms will continue across Queensland this week.

It will be at least a month before coal operations return to normal, Macarthur Coal Ltd. Chairman Keith De Lacy said on Bloomberg Television today. The company has resumed “a little bit of mining,” he said. Macarthur is the world’s largest producer of pulverized coal used in steelmaking.

The “timing of the recovery depends on the rain,” ANZ Bank’s Pervan said in a note to investors Jan. 7. “The rub is that the wet season normally peaks in February/March, so risks remain high for an extended delay.”

--With assistance from Angus Whitley in Sydney, Rebecca Keenan and Wendy Pugh in Melbourne, Jason Scott in Perth and Rishaad Salamat in London. Editors: Malcolm Scott, Keith Gosman.

To contact the reporter on this story: Jacob Greber in Sydney at jgreber@bloomberg.net.

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net