Bushfire hazard results from the complex interaction of highly disparate anthropogenic and natural factors. It is the only natural hazard in which humans have a direct influence on the hazard situation. The majority of fires near populated areas are caused by human activity, the smaller portion starts naturally by lightning. Besides accidental causes, a significant number of fires are ignited deliberately. In Australia, most of the overall and insured losses are caused by bushfires in the southeastern part of the country, where high hazard meets high exposure.
The Black Saturday Victorian Fires in 2009 – the most recent major loss event for property and casualty insurers – burnt some 4,500 km2 of land, killed 173 people, injured hundreds more and destroyed about 2,000 homes. Domestic property and contents insurance accounted for around three quarters of the A$ 1.2bn insured property loss (indexed using CPI); commercial, industrial and farming policies accounted for one quarter. Estimates indicate that 80% of the insured people affected by the fires were underinsured. Compared with other natural hazards, the share of total losses (destroyed houses) is higher on average in the case of bushfires; therefore underinsurance effects can be greater. Most houses are either destroyed completely or left virtually undamaged –there are only few structures with partial damage. Aside from underinsurance, 13% of the destroyed residential properties in the Black Saturday Fires were not insured at all.