January 12th, 2011

Update: Floods in Queensland, Australia

Posted at 12:15 PM ET

queensland2smallHeavy rain has continued to fall in the Australian state of Queensland over the last few days, flooding more towns and cities and forcing thousands of people to evacuate their homes. Persistent and heavy rainfall has pushed the floodwaters further east, putting thousands of homes in the city of Brisbane (population of around two million people) at risk. The floods are being described as the worst to hit Queensland in more than 50 years, having killed 16 people in the past two weeks, destroyed infrastructure and crippled the coking coal industry in the region. Officials say around 200,000 people have been affected by the floods with thousands of buildings inundated. The floods have covered an area the size or France and Germany combined since December 25, with several communities cut off or inundated. The damage bill, estimated at AUD/USD5 billion before southeast Queensland came under threat, is now expected to increase significantly. The Insurance Council of Australia (ICA) has declared the event a catastrophe but it is still too early to estimate losses for the (re)insurance industry.

The floods were initially triggered by a period of heavy and persistent rain in Queensland towards the end of 2010, possibly as a result of the La Niña weather pattern. The situation was exacerbated when Tropical Cyclone Tasha made landfall in Queensland as a weak tropical storm in late December (some 16 kilometers to the south of Cairns), bringing more heavy rain to the region. According to Australia’s Bureau of Meteorology, up to 300 millimeters (12 inches) of rain fell in 24 hours in parts of Queensland as Tasha came ashore and some coastal areas received 250 percent above-average rainfall during this time. The heavy rain caused major flooding along several rivers, including the Fitzroy River, the Burnett River, the Condamine River, the Balonne River, the Dawson River, the Mackenzie River, the Nogoa River, the Weir River and more recently the Mary River, the Bremer River and the Brisbane River. The rainfall recorded in the last 72 hours fell on saturated ground, exacerbating the flooding that preceded it. Overtopping consequently occurred along rivers in southeast Queensland, resulting in severe flooding in Toowoomba, Ipswich and the outskirts of Brisbane.

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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 GC AnalyticsTM representative for assistance or go to www.i-axs.info for further information.

Reports said authorities in Brisbane have warned the flooding could rival the devastating floods of 1974, when the Brisbane River burst its banks, inundating a third of the city’s metropolitan area and flooding at least 6,700 homes. Officials say many more people are expected to be affected by the 2011 floods as Brisbane has undergone considerable development in the last 35 years. More than 30 suburbs and 2,100 roads are expected to be left under water, according to officials. The floodwaters have already reached the tops of traffic lights in western areas of Brisbane, and authorities warn around 19,700 homes and 3,500 businesses are in danger of being completely flooded (another 12,000 homes are expected to be partially affected). Streets in the city are largely empty after the center of Australia’s third-largest city was effectively shutdown. Power has reportedly been cut to around 127,000 households in the region and 3,500 people fled to evacuation centers. The Port of Brisbane was closed, shutting down Australia’s third-busiest container port and a 5 million tons per year coal-loading facility.

Brisbane Mayor Campbell Newman said the floodwaters are expected to peak in Brisbane around 04:00 local time on January 13 and last for several days. He added Brisbane’s Wivenhoe Dam, which had so far protected the city from flooding, was full and authorities now had to release water, sending floodwaters into Brisbane. Authorities initially feared the Brisbane River would exceed the 5.45 meters (17.9 feet) peak that was reached during the 1974 floods. However, the BoM now expects the river to peak at 5.2 meters (17 feet). Yet Brisbane City Council still expects 33 suburbs to be hit by flooding: Albion, Auchenflower, Bowen Hills, Brisbane City, Bulimba, Chelmer, Coorparoo, East Brisbane, Fairfield, Fig Tree Pocket, Fortitude Valley, Graceville, Hemmant, Indooroopilly, Kangaroo Point, Lytton, Milton, Moggill, Murrarie, New Farm, Newstead, Norman Park, Oxley, Pinkenba, Rocklea, Sherwood, South Brisbane, Tennyson, Toowong, Yeronga, Yerongpilly, Windsor, Wacol.

In the nearby town of Toowoomba, the heavy rain triggered severe flash flooding that saw an eight-meter wall of water sweep away cars following more than 36 hours of incessant rain. Reports said the deluge, described as an inland tsunami, devastated homes and infrastructure in the town. A huge search-and-rescue operation was mounted in Toowoomba, with helicopters winching people to safety. However, at least at least 12 people were killed in Toowoomba and 43 more remain missing. In the city of Ipswich, reports said 3,000 homes were under water and 1,100 people relocated to evacuation centers after the Bremer River peaked at around 19 meters (62 feet). The city of Gympie was also inundated after the Mary River burst its banks while entire houses were swept off their foundations in Grantham.

Reports said a total of 40 towns and cities in Queensland have been badly flooded, with thousands of properties inundated. Before the recent flooding in southeast Queensland, nine areas in southern and central Queensland were declared disaster zones (Rockhampton, Emerald, Dalby, Chinchilla, Bundaberg, Theodore, Condamine, Alpha and Jericho). The city of Rockhampton (population of around 75,000) was badly hit after the Fitzroy River burst its banks, isolating it from the rest of the country after all transport links were severed. The BoM said the Fitzroy River peaked at 9.2 meters (30 feet) at Rockhampton and has remained close to this level since. Mayor Brad Carter said the water was expected to drop to 8.5 meters (28 feet) by the weekend and recede more quickly after that. Officials said some 1,000 people evacuated their homes in Rockhampton at the height of the floods, but there has been no official estimate on the number of inundated buildings.

Elsewhere, officials in Bundaberg said the town was isolated by rising floodwaters, inundating around 300 homes and 120 businesses. The community of Theodore was also cut off, leaving hundreds of people stranded and prompting a rescue operation, supported by military helicopters, to evacuate all of the town’s 300 residents. Several other towns and villages were been badly hit, including Chinchilla, Condamine, Dalby and Emerald. Reports said much of Chinchilla was under water, with around 60 homes and businesses inundated. Reports said the flooding in Dalby was the worst since 1981, damaging the town’s water treatment plant and threatening the supply of drinking water. According to reports, floodwaters have returned to Dalby over the last couple of days, flooding hundreds of buildings. In Emerald, officials described the flooding as the worst on record, with about 80 percent of the town submerged and some 1,000 homes inundated by water from the Nogoa River.

In Condamine, meanwhile, floodwaters hit record levels, with officials warning the town could remain abandoned for a week. Residents in the southern town of St George are also on heightened alert after the BoM warned rising floodwaters could inundate 80 percent of the town. As the Queensland floods and rains move south, major rivers in the neighboring state of New South Wales have flooded some communities, forcing around 3,000 people to leave their homes. The Clarence River around Grafton is also close to bursting and the main Sydney to Brisbane highway is now closed between Grafton and Maclean.

The flooding has also closed hundreds of roads in Queensland, including nine major highways, while Queensland Rail and TransLink has reported major disruption on all train lines. Industrial and agricultural interests have also been affected by the floods. Queensland is the world’s biggest exporter of coal used in steel-making and the floodwaters have brought production and shipments overseas to a virtual standstill. State officials said the floods had halted operations at 40 of Queensland’s coal fields, forcing mining companies to declare force majeure. This represents 75 percent of operations in the region and it is likely to take months before production is restarted. Flooded railways have also disrupted coal transportation and, last week, the Queensland Resource Council (QRC) said the floods had cost the state coal industry an estimated USD1 billion in production. Crop losses are also likely to be significant. The floods have severely disrupted the planting and harvesting of key crops such as cotton, sunflower, sugar, wheat and barley. An early estimate by farming lobby group AgForce suggested crop losses alone could exceed AUD1 billion.

Prime Minister Julia Gillard initially estimated the economic damage from the floods would reach around AUD5 billion. However, as the floodwaters have spread east, this projection has risen, with a member of Australia’s central bank now warning the disaster could cut 1 percent off projected economic growth, equal to almost AUD13 billion. Reports say it is still too early to gauge how the floods will impact (re)insurers as cover for flood damage is not standard in many buildings and contents insurance policies in Australia. According to AIR Worldwide, residential flood coverage varies considerably by insurer and location in the country while commercial policies generally include flood coverage. However, reports said coverage for flood in crop insurance policies is limited.

On January 7, the ICA said insurers had received around 4,300 flood-related claims totaling around AUD150 million. However, this was before the floodwaters reached Toowoomba, Ipswich and Brisbane. Reports say the arrival of floodwaters in such urban areas is likely to see a dramatic jump in insured losses, particularly if commercial properties are affected. Mining losses are also likely to form a significant proportion of the insured cost. The previous biggest insurance payout for a flood event in Queensland was AUD410 million for the Mackay floods of 2008, according to reports.

Sources: Reuters News, BBC News, Associated Press, Agence France Presse, The Queensland Times, Australian Broadcasting Corporation, Australian Associated Press, Best’s Insurance News, The Australian, Brisbane City Council

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Guy Carpenter publishes 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.

Guy Carpenter compiles 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.

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 GC AnalyticsTM representative for assistance or go to www.i-axs.info for further information.

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