Plantation wood insurance unaffordable for producers after the black summer fires

A year ago, forester Andy Wright let the insurance expire on his softwood plantation in Denmark, Western Australia.

In February, fires ravaged the local forests and destroyed its trees.

“It’s probably a quarter of a million dollars worth of damage. Another plantation on the hill was ready to be harvested and would be worth millions,” Mr Wright said.

Despite the loss, he does not regret the decision to cancel his fire insurance.

“Premiums quadrupled following the east coast bushfires a few summers ago,” he said.

Knowing the excess he would have paid for a claim and the salvage value of the timber, Mr Wright said insurance would not have been financially worthwhile.

“Even now, in our worst year, we will likely break even from where we could have been if we had the insurance,” he said.

David Wettenhall, another WA forester, said his premium quote had increased “7.7 times” this year.

Andrew Wright estimates that “25-40%” of small foresters in south-west Western Australia are uninsured.(ABC News: Angus Mackintosh)

New insurance plan could offer hope

David Geddes, who consults foresters across Australia and is a former chairman of Australian Forest Growers, the industry body for Australian plantation foresters, said the number of insurance providers had dropped dramatically.

“Before this summer, there were half a dozen [insurance] providers but as far as I know there is only one insurer this year and their books are filling up quite quickly,” he said.

Mr Geddes said the claims following the Black Summer bushfires in 2019-20 were among the biggest insurers ever, coinciding with fires in North America and Europe.

He said a new insurance scheme was in the works to help small plantation growers next year.

“This summer has been particularly difficult, but we expect a program to be available for next summer,” Mr Geddes said.

“I think [the lack of insurers] is a short-term problem.”

PSC Insurance Group and the Insurance Council of Australia declined to be interviewed for this story.

“One in five chance” of harvest for producers

Nevertheless, Mr. Wright saw no end in sight to the dramatic increase in forest insurance premiums.

Woodchip plantations like his weren’t the only ones affected. Timber, carbon forestry and furniture grade timber plantations all depended on the same insurance.

“No matter what you’re growing the crop for,” Geddes said, “it’s all covered by forest insurance.”

a graph showing a decline in new plantings in Australia
New plantations established in Australia since 2009.(Provided: ABARES)

Professor of forest management and ecology at the Australian National University, David Lindenmayer, said logging in native forests made them more vulnerable to severe fires and the logging industry should urgently refocus on the planting of more managed plantations.

“We are much better off sourcing timber from plantations, and we are much more likely to get a harvest from plantations in a growing fire climate, than from native forests,” Professor Lindenmayer said.

a burnt tree in a forest
Charcoal cannot be removed from burned wood, which destroys the export value of what is left of the trees in the plantation.(ABC: Angus Mackintosh)

Insurance is just the latest hurdle facing Australia’s timber industry, which is still reeling from the Black Summer bushfires.

Even if cover is made available next year, Mr Wright said the premiums were unsustainable for many growers and seriously discouraged investment in new plantings.

“It’s a major problem for forestry in Australia and the big companies are really wondering what to do,” he said.

“If you are an investor and want to put in your pocket for a risky 30-year investment in softwood lumber, that is going to make you much more reluctant.

In the previous financial year, the total value of Australian timber exports was $2.7 billion, down 18% from the previous year and $900 million less than in 2017-18.

Tackling climate change is part of the solution

Dr Pep Canadell, chief researcher at the CSIRO Climate Science Center and executive director of the Global Carbon Project, said the area of ​​Australian forest destroyed by fire has increased by nearly 50,000 hectares every year for three decades.

a graph showing an increase in plantation fires in australia
Plantation area lost during fires where more than 100 ha were burned (1920-2020).(Provided: David Geddes)

Prof Lindenmayer said there were ways to fix the problem.

“Combating climate change, letting native forests grow as old as possible – because that’s where the risk of fire is lowest – and designing our plantations to reduce the risk of large areas being lost in one single fire [will help],” he said.

But in the meantime, foresters like Mr. Wright need affordable, available insurance to keep planting.

If the number of new plantings continues to stagnate, Prof Lindenmayer said timber availability will be affected in coming years.

“The plantation industry dominates the Australian landscape in terms of financial value and the sawn timber we need for homes,” he said.

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