February 25th, 2009

CAT-i Update: Bushfires in Australia Report 3

Posted at 12:30 AM ET

Hazard data illustrated in the CAT-i map was taken from i-aXs®, Guy Carpenter’s web-based risk management platform. i-aXs users can view impacted areas on any map as well as see how their portfolios were affected. Please contact your broker or Instrat® representative for assistance or go to www.i-axs.info for further information. For these particular bushfires, Guy Carpenter has been providing its clients with impacted postcodes lists.

Summary

Four large fires continue to burn across Victoria as authorities warn the threat of new fires remains high. Firefighters are battling to contain the remaining blazes after more than 400 bushfires fanned by strong winds of up to 60 mph (100 kmph) hit the states of Victoria, New South Wales and South Australia in early February. Officials said at least 209 people have been killed and more than 1,800 homes have been destroyed, the vast majority in the worst affected areas north of Melbourne in Victoria State. In addition to those killed, more than 500 people have been injured.

According to the Insurance Council of Australia (ICA), the general insurance industry has received 6,230 claims from the bushfires so far, amounting to around AUD790 million (USD505 million). Of the claims received, 85 percent relate to property and contents and 15 percent are for motor vehicles, the ICA said. The ICA added that while the industry is working closely with the Victorian and federal governments, there have been a number of issues raised (e.g. difficulty in gaining access to affected areas) that may cause delays to the recovery process and the rebuilding effort.

Fire authorities warned today that the bushfire threat remains high. A total of 1,700 square miles (4,400 square kilometres) have been affected by the bushfires so far and entire towns have been completely destroyed by what police are describing as the worst bushfires in the country’s history. Australia’s previous worst bushfire event was in 1983 when 75 people were killed and 2,300 homes were destroyed in the “Ash Wednesday” fires. The disaster area, reportedly more than twice the size of London and encompassing more than 20 towns north of Melbourne, has been declared a crime zone by officials. Officials are investigating the cause of the bushfires, suspecting that some were started deliberately while others were ignited by lightning strikes, sparks from power lines or discarded cigarettes.

Suspicions that some of the blazes were caused by arson has led police to declare crime scenes in some razed towns and resulted in a 100-strong police investigation squad being set up. Victoria State Police Commissioner Christine Nixon has launched Operation Phoenix, vowing to catch anyone who started a blaze, and Australian Attorney General Robert McClelland said suspected arsonists could face murder charges. One man was arrested and charged with arson on February 13, 2009 and the investigation is ongoing. Fire officials monitor lightning strikes and any fire that does not correspond with a strike is assumed to be started by people, either accidentally or deliberately.

Prime Minister Kevin Rudd has announced an aid package of AUD10 million (USD7 million) and pledged that damaged communities would be rebuilt, with no limit on federal spending. Officials said 10,000 people have been made homeless and are seeking shelter in community halls, schools and churches. Two large fires caused most of the damage in Victoria, one located northeast of Melbourne that virtually razed the towns of Kinglake and Marysville, and a second that raced across Gippsland to the southeast of Melbourne. The fires have disrupted transportation in the affected areas, with authorities closing several main roads and highways. Up to 14,000 homes and businesses were without power when the fires were at their peak, and 4,300 households were still without power as of February 13, 2009. A number of vineyards in the Yarra Valley were also destroyed, Reuters said.

The largest blaze in Victoria was located in the Kinglake area, about 50 miles (80 kilometres) northeast of Melbourne. The Kinglake bushfire burned around 950 square miles (2,500 square kilometres) as it tore through several towns on February 7, 2009, destroying everything in its path. Reports said the fire was as tall as a four-storey building and was sparking spot fires 25 miles (40 kilometres) ahead of itself. Kinglake, Marysville and their surrounding communities were the worst affected areas, with Marysville (population of around 800 people) reported to have been virtually wiped out (up to 90 percent of buildings destroyed) and Kinglake also reported to be devastated. The Kinglake area is thought to be the worst affected location, with more than 550 homes destroyed and at least 47 people confirmed dead in Kinglake and Kinglake West. Forty-five deaths have also been reported in Marysville and 42 in Strathewen. In total, the Kinglake fire is thought to have caused around 150 deaths. Other towns reportedly affected by the blaze include Whittlesea, Wandong, Narbethlong, Buxton, Taggerty and St Andrews. Officials said around 95 percent of homes were destroyed in Narbethlong and 150 homes were burnt in Wandong.

Fires have been burning for weeks in Victoria and tens of thousands of firefighters were deployed over the weekend of February 7, 2009 when temperatures of up to 118 degrees F (48 degrees C) and strong winds created a firestorm that swept across the state. A long-running drought in the south of the Australia has left forests extra dry and created fire conditions that officials said were the worst ever in Australia.

The bushfires are the most deadly natural disaster in Australia in 110 years, according to reports. In 1899, Cyclone Mahina struck Australia’s northern Cape York, killing more than 400.

Sources: BBC News, CNN News, Associated Press, Associated Press, Agence France Presse, Reuters News, Australian Associated Press, Australian Broadcasting Corporation, Dow Jones Asian Equities Report, Dow Jones International News

Read previous installments of this report:

Guy Carpenter’s Instrat® department provides CAT-i reports for major natural catastrophes worldwide. These reports cover catastrophes including worldwide tropical cyclones, earthquakes, major UK and European floods and any other natural event that is likely to incur a significant loss to the (re)insurance industry. Please email CAT.i@guycarp.com if you wish to be added to the free email distribution list.

Instrat also provides RISK-i reports for major technological or man-made events worldwide. These reports cover risks to property, transport and life including explosions, fires, crashes, engineering disasters and terrorist attacks that are likely to incur a significant loss to the (re)insurance industry. Please email RISK.i@guycarp.com if you wish to be added to the free email distribution list.

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