The big business of natural disasters

Natural disasters – predictable yet shocking

Fires raged across Victoria and New South Wales last month, claiming one life, tearing through hundreds of thousands of hectares, destroying hundreds of structures and an estimated 1,000 agricultural properties.

Within days, a State of Disaster was declared for parts of Victoria and $19.5 million in State and Federal support was pledged to begin the massive clean-up.

Further north, ex-tropical cyclone Koji was wreaking havoc as it crossed the North Queensland coast, followed by damaging rainfall, flooding, daring rescues and shocking loss and damage.

If those scenarios sound familiar, it’s because they are – they play out in some form every Nat Cat season.

When the fury of Mother Nature is at full force, the focus is quite rightly on those in immediate danger and what emergency personnel, armies of selfless volunteers and communities themselves can do to keep people and property safe.

Government and its emergency authorities have an obvious lead role in managing natural disasters, and they rely on the courageous help of local heroes – volunteers on the front line and in a raft of other support roles.

But what is the business of business when it comes to natural disasters? How does business contribute when disaster strikes? What are the opportunities, obligations and challenges facing businesses, especially in the context of the unsustainable economic cost of natural disasters and an increasingly challenging insurance market?

Quick and generous response

The Black Summer Bushfires of 2019-2020 are still vivid in Australia’s collective memory and, as well as the memories of tragedy and loss, the stories of how businesses big and small responded in the most practical and generous of ways also loom large.

The National Bushfire Recovery Agency’s Journey to Recovery report, in a short section on the role of NGOs and the private sector, says ‘Non-government organisations are funded to support immediate responses across all recovery domains (social, built, economic, environmental) – staffing recovery centres, attending to immediate needs, including food and shelter, rescuing wildlife and supporting people to connect with other services.

‘Through contracts with local, state and territory governments, and the Australian Government, these organisations continue to aid recovery and provide critical services, including mental health support and advocacy, through the initial relief period and on to long-term recovery.’

The generosity of the business sector went much further.

By early January 2020, large businesses, and even local and international celebrities had contributed or pledged hundreds of millions of dollars. The auction of Shane Warne’s baggy green cap raised $1m. The Business Council of Australia announced the creation of an ongoing trust to help families of volunteers killed while fighting fires.

There were also generous in-kind and cash donations from SMEs across the country, often acting on behalf of and/or coordinating support from their employees. Many gave a percentage of sales or profits and coordinated their own fundraising events and projects.

Many businesses gave paid leave to workers who were volunteering or impacted by the fires, along with other considerations for staff. PwC’s Chief People Officer, Dorothy Hisgrove, told ABC News they had also reached out to Federal and state governments to offer their skills and ask how they might best partner and collaborate with them.

Fast forward to 2026, and business and industry groups again responded quickly to the Victorian bushfire disaster, including generous in kind and cash donations.

The Victorian Chamber of Commerce and Industry created a resource hub with information on emergency aid, financial assistance, mental health support, and business recovery services. It is also offering free, practical HR advice.

The Victorian Farmers Federation’s activated its Disaster Relief Fund and the Organic Investment Cooperative, which supports organic and biodynamic producers impacted by natural disasters, reopened its Resilience and Recovery Fund to support local farmers.

Specialist teams from Australian banks and insurers also swung into action to help individuals and businesses.

The Australian Banking Association advised ‘Support from banks could include deferrals on credit card and loan repayments, emergency credit limit increases, loan restructuring, fee and charge waivers or refunds and additional finance to help cash flow gaps.’ Bendigo Bank has launched its own Victorian Bushfire appeal.

The insurance industry response intensified after the Insurance Council of Australia declared the fires a Significant Event on January 11, triggering catastrophe protocols. At that stage insurers had received more than 1,300 claims spanning property, commercial, motor and business interruption.

‘Several insurers and ICA representatives have now established a presence at the Castlemaine Recovery Centre to help affected residents and businesses navigate the claims process and understand their cover,’ reported the ICA.

Health insurers too mobilised with announcements of temporary support for members affected by both the Victorian fires, and for Koji-related flooding in Queensland.

What motivates business?

Why does business step up so readily and generously?

Reasons cited in Jonathan Van Leeuwen and Andrew Gissing’s 2020 research, Business involvement in natural disasters in Australia and New Zealand included:

Looking after customers (e.g. a mining business that paid for employees to help clean up following the Queensland floods of 2010-11).
A commitment to employees.
Corporate Social Responsibility – a desire to make a contribution to the community.
Maintaining business continuity (e.g. an energy company that altered their supply chains and worked extended hours to reopen retail sites and truck stops to maintain a steady supply of fuel in Christchurch after the 2010-2011 earthquakes).

Neither profit nor regulatory requirements were mentioned.

Despite the motivated and generous support of the business community, the researchers say support from large businesses is ‘not universal and the potential exists to enhance the role of the business sector as part of a nationwide whole-of-community approach to emergency management.’

It also suggests authorities and business might collaborate more and more effectively.

Quite rightly, it is also noted that the business sector itself is vulnerable to disruption in a disaster and so strong business resilience is a prerequisite for business supporting community needs.

Business in the line of fire

Businesses are also in the line of fire when it comes to Mother Nature, and those connected to the business may also suffer significant personal loss.

According to ScotPac Business Finance, ‘Natural disasters have become a persistent and material risk for Australian SMEs’ with its latest data revealed 65% of SMEs have been impacted by bushfires, floods or cyclones in the past five years.

By the start of 2020 – with the Black Summer Fires still raging, a snap Roy Morgan survey of more than 1300 Australian businesses indicated more than a quarter (26%) were impacted by bushfires that season. The businesses were across the country – from Tasmania to Western Australia – and most were in the tourism and transport, postal and warehousing sectors.

The Whitsundays Chamber of Commerce and Industry last month (January) launched a survey to help assess ‘the effects of the cyclone on business operations, revenue, staffing and recovery outlook’, saying ‘some businesses were experiencing significant disruption or ongoing challenges’.

The full impact of the 2026 fires in Victoria and New South Wales is still being assessed but it is clear there have been massive losses, particularly in the agricultural, viticultural and hospitality sectors – the Harcourt Cooperative Cool Stores was totally destroyed and, according to a report in The Guardian ‘had become essential storage for about 85 customers, from boutique producers to established wineries …’

Preparing, coping and recovering

The Federal Government provides advice, templates, resources and information for businesses preparing, planning and coping during flood, fire, cyclones and other natural disasters, as do industry organisations and emergency services authorities.

There are also handy links and tips in this EBM article which disturbingly reports only one in four small businesses have a disaster plan even a year after the 2022 catastrophic floods wreaked havoc across New South Wales and South East Queensland.

Given the increase in the frequency and severity of natural disasters in Australia, preparation, as the NSW Small Business Commissioner (who also provides significant resources for business operators) says, is ‘simply good business’.

Business owners and operators should get rid of any sense that ‘it will never happen to them’ and:

Realistically assess the risk to physical infrastructure and your business operations – identify what disasters the business could face and realistically assess preparedness.
Plan thoroughly – engage your team and encourage them to challenge and question as you go. Allocate responsibilities carefully and clearly, and make sure team members are aware and trained for the roles they may be required to take on.
Consider the human resource implications of a natural disaster – talk to your staff about how prepared they are and what other demands they might have if disaster struck.
Be aware of your obligations as an employer and what capacity you might have to offer other considerations.
Plan for business continuity including where vital documents and data are stored or backed up. Scenario planning could be helpful.
Identify key connections that might help during any disaster and in the recovery phase – think banks, landlords, advisers and (of course) your insurance broker!
Consult and collaborate with other local business operators, or others in your sector.
Have a business recovery plan – including communication with advisers, employees and customers and information about possible sources of grants and other support.
Regularly test and update plans and preparations.

In terms of insurance protection:

Don’t wait for a disaster to be imminent to make sure you are well protected with the most appropriate cover for you and your business.
Seek advice from an experienced insurance broker you trust.
Read policies carefully – be aware of what is and isn’t covered and note requirements for legislative and regulatory compliance.
Assess the value of your assets realistically – what it would cost you to replace them if they were destroyed.
Collate an inventory (visual as well as written descriptions) of your property, along with all the relevant documentation (receipts/tax invoices etc.) and make sure there’s a copy kept off-site.
Review and update your insurance regularly – responding to changes in your own circumstances and in the insurance industry which is subject to global and local influences.

Longer term implications

The Insurance Council of Australia releases an annual Insurance Catastrophe Resilience Report 2024-2025 and the latest is grim reading. ‘While extreme weather is costing developed nations more with each passing decade, Australians are paying an outsized price. Per person, we’ve consistently shouldered higher economic and insured losses than a range of other developed nations, except the United States,’ it reports.

Like a raft of other reports and commentary, it makes the point that we all pay the price – extreme weather events cost Australia around $4.5 billion annually. Unfortunately, it is also well-reported that the impact of natural disasters in Australia is greatest on ‘those least equipped to recover economically,’ as ICA CEO and Executive Director Andrew Hall puts it.

The Independent Review of Commonwealth Disaster Funding (the Colvin Review) estimates the cost of disasters (excluding the impact of climate) will rise from $11.8 billion in 2023-24 to more than $40 billion in 2049-50. Andrew Colvin AO says there is little doubt current disaster funding arrangements ‘under increased stress’ and ‘not optimised to support a system that is fit for purpose.’ It makes 47 recommendations, including changes to how business is engaged in disaster support and recovery.

From an insurance industry perspective, ICA Chair Steve Johnson says ‘We know the true cost of natural disasters extends well beyond the physical damage. While the financial cost of insured extreme weather over the past five years is estimated to be around $22.5 billion, a 67 per cent jump from the previous five-year period, the real economic and productivity damage runs much deeper with disrupted supply chains, closed businesses, cut-off workers, and agricultural land left unusable. This is not to mention the often-overlooked psychological toll these events have on people and communities, which are enduring.’

The implications for insurance cover and pricing are significant – and many businesses are already struggling to find appropriate insurance at an affordable price. The November 2024 Commonwealth Select Committee Report on the Impact of Climate Risk on Insurance Premiums and Availability makes eight recommendations designed to help drive down premiums, improve community resilience, improve insurance industry transparency, boost disaster preparedness, and better protect Australians in the face of worsening extreme weather. It is centred around governments, communities and insurers working together to improve resilience to extreme weather risk.

As Insurance Business magazine reported last month, ‘Elevated aggregate natural hazard costs, combined with catastrophe reinsurance structures and risk adjustment movements, are likely to remain key inputs to pricing, capital management, and portfolio strategy through the second half of FY26 and into upcoming renewal periods.’

Take action

In the face of rising insurance costs and reduced availability, the opportunity for business is to be proactive in managing cost and risk:

Review and upgrade your risk management – across every aspect of your business.
Develop and nurture a safety and risk management culture.
Read your policies carefully (and seek advice) to see whether they are still fit for purpose.
Review your sums insured – some may need increasing, but the cost of some equipment and other items may have come down.
Test your appetite for risk and consider whether you might increase excesses or make changes to your policy to otherwise reduce the premium.
Explore the various insurance options available. In addition to traditional covers such as property damage, business interruption, and contingent business interruption, consider alternative risk transfer solutions like parametric insurance. Read more about parametric insurance.

Key takeaway

The frequency and severity of extreme weather events and natural disasters in Australia is increasing. Devastating fires and flooding just last month again underlined the predictability and seriousness of the issue. As well as the enormous personal and social costs, there are devastating effects on businesses affected and an unsustainable economic cost to the country.

The pressures on the price and availability of insurance in disaster-prone areas is of continuing concern, with flow-on effects across the country.

Business already plays a significant role in supporting communities during and after a natural disaster, and there are opportunities for those efforts to be expanded and for greater collaboration with government.

At the same time, business owners and operators must grapple with their individual challenges – ensuring they and their teams are well-prepared and well-positioned for business recovery, including the best-possible insurance protection.

Need expert guidance?

Talk to your EBM Account Manager about risk mitigation strategies to protect your business in the event of a natural disaster. Your broker can help you assess the risks specific to your business and how best to navigate the dynamic disaster insurance landscape.