Insurance

Black Summer five years on: A sobering reminder of Australia bushfire risk

February 23, 2025

Just over five years ago in January 2020, Australia was experiencing the peak of its ‘Black Summer’ bushfires as the world witnessed their devastating impact and the sheer intensity, scale, and duration of this event. 

  • The Australia Black Summer bushfires in 2019-20 were unprecedented in geographical scale and duration and affected 80 percent of the continent’s population, causing AUD2.4 billion (US$1.5 billion) of insured loss.
  • Observed long-term climate trends indicate that similar events may become more likely. Comprehensive probabilistic models are key instruments for insurers and reinsurers to obtain a robust view of portfolios at risk, get the past in the right context, and prepare for all possible future events. 
  • Moody’s RMS Australia Bushfire HD Model will become a core solution for our clients addressing the complexities of the bushfire risk and bridging the gap in accurate loss estimation and risk management.

 

In a country familiar with bushfires, the ‘Black Summer’ which saw fires rage for almost a year, was unprecedented and highlighted the escalating risks posed by the changing risk landscape and a critical need to understand this peril with robust risk modeling solutions.

 

Timeline of the event

The fires began in July 2019, initially with smaller fires in areas within the state of New South Wales. However, as the months progressed, the situation worsened. By September 2019, neighboring Queensland joined New South Wales in experiencing fires growing in significance.

By December 2019, the intensity and scale of the fires had escalated dramatically, causing catastrophic bushfire-inducing conditions across the country. The crisis peaked in January 2020 as fires raged across multiple states, including Victoria, Tasmania, South Australia, and the Australian Capital Territory.

By February 2020, cooler conditions and rainfall began to bring some relief, but it wasn’t until May 2020 that the fires were fully contained. The approximate total extent of the bushfires can be seen below in Figure 1. 

Extent of Australia Black Summer bushfires

Figure 1. Indicative aggregated fire extent dataset, accounting for fires from July 1, 2019, to June 22, 2020. (Source: Australian Government Department of Climate Change, Energy, the Environment and Water https://fed.dcceew.gov.au/datasets/erin::national-indicative-aggregated-fire-extent-dataset/about)

 

An evolving crisis

The Black Summer bushfires were a complex event with multiple factors contributing to their severity and rapid escalation. Severely below-average fuel moisture, record-breaking temperatures, drought, and high wind speeds are considered to be the underlying reasons for such an intense bushfire season. Observed climate trends have resulted in worsening conditions for bushfires to become more intense and to affect large areas—including urban areas.

Looking more closely at why these conditions were conducive to destructive bushfires, they included:

  • Increased aridity: Prolonged drought conditions dried out vegetation, turning it into readily available fuel.
  • More frequent and intense heatwaves: Extreme heat increases fire danger significantly by drying out the landscape further and creating strong winds.
  • Changes in fire weather patterns: Observed weather patterns are changing toward more frequent and intense fire weather events with strong winds and low humidity.

Most of these bushfires often started in remote areas ignited by thunderstorm activity, which made it difficult for first responders to act. Some of the largest fires then generated pyrocumulus clouds, formed by the intense bushfire heat. These clouds can create their own weather system, including lightning and strong winds. The lightning produced by such clouds can ignite new fires, while the strong winds can spread existing fires more rapidly.

This combination of factors contributed to uncontrollable bushfire behavior and growth in size and intensity, and it's important to remember that these factors interacted in complex ways, making it difficult to isolate the impact of any single factor.

 

Unprecedented damage

The Black Summer bushfires were unlike any previous fire season in Australia. Spanning from July 2019 to May 2020, with the most severe period between December 2019 and January 2020, these fires affected nearly 80 percent of Australians, causing profound impacts on wildlife, human health, and the economy.

The Insurance Council of Australia (ICA) estimated the insured loss at AUD2.4 billion (as of 2024 valuation), making it one of the costliest bushfire events in recorded history. In terms of economic loss, some estimates exceed AUD10 billion.  

The scale of the devastation was unprecedented; according to various estimates between 19 to 24.3 million hectares or 60 million acres (comparable to the territory of the United Kingdom) burned, destroying over 3,000 homes and claiming at least 33 lives.

For the tourist industry, the country experienced losses of AUD2.8 billion in total output due to the fires (Reiner et al, 2024). The fires also cost Australian agriculture between AUD4-5 billion.

Entire species of plants and animals were thought to have been wiped out by the bushfires, estimates ranged as high as one billion animals killed.

There were examples of terrible loss of plants and animals, including Kangaroo Island off the coast of Adelaide where 520,000 acres or 52 percent of the island burned during January 2020, and an estimated 40,000 koalas living on the island perished.

 

What to expect in the future

This event has demonstrated how the bushfires may look like in the future. A joint study by the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and the Australia Bureau of Meteorology (BoM) (Canadell et al. 2021) concluded that in the past few decades, bushfires have been growing in size by approximately 48,000 hectares (118,000 acres, equivalent to the size of the country of Andorra) per year, with increased extreme fire weather, as well as prolonged fire seasons.

Forest fire activity in Australia is influenced significantly by high inter-annual climate variability and extreme weather events.

Anthropogenic climate change has the potential to alter these fire dynamics further. Results of this joint study by CSIRO and BoM indicate a linear increase in annual forest burned area, with an exponential rise observed during autumn and winter. This increase in forest fire activity aligns with the increases in dangerous fire weather conditions, which means we will see more severe and larger fires in the future.

 

Impact on the insurance industry

The Black Summer bushfires presented a significant challenge to the insurance industry, as insurers faced unprecedented claims volumes, exceeding their historical experience.

This event highlighted the limitations of traditional risk models that rely on historical data alone, which may not have adequately captured the potential severity and frequency of such extreme events.

Recognizing the significance of bushfire risk, the industry turned to Moody’s scientists for a solution, and along with our industry partners, we are thrilled about the forthcoming Australia Bushfire HD Model. It offers a view of the current climate perspective, improved modeling methods, data analysis, and an advanced understanding of the Australia-specific vulnerabilities and impacts on losses.

This advanced Moody’s RMS model is designed to simulate events similar to the Black Summer fires, providing a robust and accurate view of potential losses. The extremes will be quantified using tens of thousands of years of fire weather simulation.

By leveraging cutting-edge technology and comprehensive data analysis, the model will account for the El Niño-Southern Oscillation (ENSO) and the latest data on fuel and fire behavior. Additionally, it will be complemented by a comprehensive vulnerability suite to account for local fire management and suppression practices. This new HD model will take advantage of the functionality within Moody’s HD financial modeling solution.

 

Conclusion

The 2019-2020 Black Summer bushfires served as a stark reminder for the insurance industry about the potential extent of the peril. They highlighted the need for more sophisticated risk models that can account for unprecedented events and help the industry prepare for future bushfires fueled by climate change. By continuously improving our understanding of these complex events and refining our modeling capabilities, we attempt to better prepare for future challenges and to build a more resilient future.

 

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Author:  Iuliia Shustikova, Product Manager - Moody's

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