Despite an active El Nino and vegetation growth fuelled by previous La Ninas, Aon experts say there’s no guarantee we’ll have the severe bushfire losses that many are predicting.

Climate Risk Advisory Lead Tom Mortlock says El Nino doesn’t always correlate to increased bushfire losses and ignition is mostly random. There was no El Nino during the 2019/20 Black Summer.

“We have regional climate drivers, but they really just influence the background conditions that are conducive for bushfires to get out of control,” Dr Mortlock says.

“In Australia, bushfire ignitions are about 50% human caused and 50% lightning strikes, so nothing to do with regional climate drivers at all. The ignition is, to a certain extent, random. It’s important to make that distinction.”

Larger loss years usually occur during La Nina, which tends to result in more floods and cyclones. El Nino years often see reduced losses because “there are less flood and cyclone losses but not necessarily more bushfire losses”.

Bushfire accounts for less than 12% of catastrophe losses in Australia, partly because most people live in cities. Just 11% of property is within 100 metres of bush.

Head of APAC Analytics, Reinsurance Solutions Peter Cheesman says that feedback from clients suggests bushfire is “not a material reinsurance peril”.

“It’s not pushing through a lot of retentions, which are larger now, and not getting up to that level where insurers need to call on their reinsurers,” he says.

“Although there may be a global perception that Australia is very bushfire prone – and it’s certainly a big deal from an economic, health and safety, and environmental perspective – from an insurance industry perspective bushfires tend not to be as much of a loss driver when compared to floods and cyclones or frequency events such as storms.”