Can insurers compete with bushfires’ heat?

New South Wales is under attack by some of the worst bushfires it has ever seen, and eyes are already looking to insurance companies to gauge their own temperature. So far, at least, it seems that corporations are prepared and ready to respond.

At its annual meeting in Brisbane, Suncorp (ASX: SUN) Chief Executive Patrick Snowball stated that while it’s too early for exact estimates, his company will be behind its customers in the coming months. “We’re focusing our attention entirely on the needs of our customers that are being caught up in this tragic event,” Snowball told meeting attendees. He also assured investors that costs are estimated to fall below reinsurance agreement levels with other underwriters.

Insurance Australia Group (ASX: IAG) released its own update today, estimating its total claims received at 600. “This is a traumatic time for many people and our thoughts are with everyone impacted by this terrible tragedy,” said Managing Director and CEO Mike Wilkins in a statement today. “Our recovery option is well underway and we stand ready to assist.”

IAG didn’t delve into details on the value of already submitted claims and noted that “with the fires still burning, it is too soon to give an accurate indication of cost.” However, the company did state that its calendar 2013 catastrophe reinsurance programme has a maximum first event retention of $150 million.

IAG owns the area’s largest insurer, NRMA, which holds around 30% to 40% of the market share of affected homes and properties, according to the Australian Financial Review. IAG, Suncorp, and QBE Insurance (ASX: QBE) all have information available to their customers on how to support and submit their claims.

Foolish takeaway

Fires continue to rage in NSW, and the tragic events of the past week seem far from over. TVNZ reported yesterday that 60 fires are still burning, with the massive State Mine Fire having destroyed nearly 50,000 hectares of land and property. The Insurance Council of Australia puts total claims already submitted at 1,000, with losses clocking in around $130 million. While insurers are prepared for events such as this, the scale of this disaster may yet exceed any allotted funds.

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Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter @TMFJLo.

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