Establishing a new standard for Australian bushfire risk modelling

With a long history of devastating bushfire losses in Australia, and events such as the 2009 Black Saturday bushfires and the 2019–20 Black Summer fires that significantly impacted communities and the insurance sector, the industry is on high alert.

Moody’s is stepping up to help tackle head-on the challenges posed by this fast-evolving risk with our forthcoming Moody’s RMS™ Australia Bushfire HD Model. A new cutting-edge solution designed to capture the complex realities of bushfire risk across Australia’s increasingly dynamic environment is part of a consistent, holistic high-definition (HD) climate modelling solution for Australia.

The need for a new approach to bushfire risk management

Driven by the continent’s harsh climate conditions, bushfires are a significant natural hazard in Australia. Long drought periods followed by hot, dry weather create an environment highly susceptible to bushfires. Easily flammable native vegetation, such as eucalyptus, exacerbates the risk.

In February 2009, the Black Saturday bushfires destroyed over 2,000 homes in the southeastern state of Victoria, resulting in AU$2.5 billion of insured losses (normalised to 2025), prompting significant reviews of bushfire-related building codes and influencing notable changes in the insurance market and regulatory environment. Lessons learned from the event also contributed to enhancing mitigation and response measures across many sectors, including construction, insurance, emergency services, and land-use planning.

Some ten years later, the 2019–2020 Australian bushfire season, commonly referred to as the Black Summer, is still fresh in the nation’s memory as one of the most devastating fire seasons.

Fires during this period were unprecedented in intensity and size, and were dubbed ‘megafires’ by the media. As reported by the Insurance Council of Australia in a 2025 publication, the 2019-2020 bushfire season saw over 3,000 homes destroyed and resulted in insured losses of over AU$2.4 billion. The event affected 80% of the Australian population, either directly or indirectly.

For many decades, insurers considered bushfires a non-peak peril. However, historical records indicate a rising trend in bushfire losses over the past 20 years, with a significant increase in the frequency, intensity, and duration of bushfires in Australia. This trend is driven by rising temperatures, prolonged droughts, and more extreme fire weather conditions. [1] [2] [3]

Such devastating fires typically occur during the Australian summer (December to February) but can happen at other times under conducive conditions.

Severe bushfires occur throughout the Australian continent and regularly burn millions of hectares of grassland in the most remote areas. In contrast, fire sizes near populated areas tend to be more constrained due to mitigation measures in place around areas of high urbanization and exposure concentration. For states like New South Wales, Victoria, and Western Australia, there are few insured loss events in any given year.

However, when fueled by conducive weather conditions, bushfires may spread to populated areas, making fire suppression efforts more critical. One example is the suburb of Duffy during the Canberra Bushfires in 2003, when the fire spread into the wildland-urban interface, destroying over 200 buildings [4].

Increases in the frequency, intensity, and duration of bushfires and increasing exposure levels mean that a complete and comprehensive understanding of bushfire risk in Australia has never been more important. Our model offers a new tool for the insurance and reinsurance market, government agencies, and corporate sectors, providing an unparalleled level of detail, flexibility, and insight into bushfire risk.

Next-generation fire modelling

Using the Moody’s RMS high-definition (HD) probabilistic simulation framework, thousands of years of fire weather have been simulated for the Australia Bushfire HD Model to capture all components of fire risk: the burning of vegetation and fuels, ember transport and fire spotting—that can cause ignitions far away from the fire front, and smoke emission.

The model also includes our innovative urban conflagration modelling capability, where users can analyze the impact of a significant conflagration in some of Australia’s densest urban areas. 

All these features provide the most comprehensive representation of fire risk and location-level losses available to the market, thanks to the high resolution of the modelled hazard.

The model is built using Australia-specific vulnerability characteristics and fire suppression practices. The model is a product of close collaboration with local Australian experts and institutions, combined with Moody’s market-leading think-tank of fire modelling knowledge and expertise. Here are some of the key modeling advancements:

• High-resolution hazard representation: Provides detailed risk differentiation across diverse Australian landscapes.
• Locally calibrated event set: Reflects Australia's unique bushfire patterns based on comprehensive historical and scientific data.
• Backed by dedicated local expertise: Deep understanding of Australian risk dynamics.
• Realistic loss scenarios: Developed to support accurate exposure assessment and stress-testing for extreme loss events.
• Comprehensive exposure representation: Incorporates a wide variety of property types and regional construction practices, and mitigation measures.
• Rapid portfolio stress testing: Helps clients quickly assess exposure to emerging bushfire risks.

In addition, the model takes advantage of Moody's RMS HD financial model, allowing a wide range of functionalities, such as:

• Flexible analytical outputs: Enables custom views of loss distributions, exceedance probabilities, and tail risk exposures.
• Enhanced granularity: HD models provide a more detailed and precise representation of risks.
• Four-parameter vulnerability: HD models use four parameters to define vulnerability curves, accounting for the probability of a 100% loss and a zero loss.

Now with a consistent and holistic HD climate modeling solution for Australia, we look forward to sharing full details of Moody's RMS HD Australia Bushfire model with you at launch, and our other Australia models, to show you how we can empower your organisation better understand, manage, and build resilience against bushfire risk.

For more details on high-definition (HD) modelling, please refer to these links:

https://www.moodys.com/web/en/us/capabilities/catastrophe-modeling/high-definition-models.html

https://www.moodys.com/web/en/us/insights/insurance/high-definition-modeling-a-game-changer-for-catastrophe-risk-management.html

References:

[1] https://onlinelibrary.wiley.com/doi/10.1111/geb.13514

[2] https://www.csiro.au/en/research/environmental-impacts/climate-change/State-of-the-Climate/Previous/State-of-the-Climate-2022/Australias-Changing-Climate

[3] https://www.publish.csiro.au/WF/WF23138

[4] https://web.archive.org/web/20080530172505/http://www.ga.gov.au/image_cache/GA9581.pdf