Tracy’s lasting legacy

Last Christmas marked 50 years since the deadly cyclone struck Darwin, leaving a huge trail of destruction – and some lessons for the industry

By John Deex

About 10pm on December 21 1974, a low-pressure system over the Arafura Sea, about 360km northeast of Darwin, was named Cyclone Tracy. The storm wasn’t supposed to amount to much – but it ended up as Australia’s most devastating insurance catastrophe to that point, with losses of about $200 million.

Sixty-six people died and 35,000 of Darwin’s 48,000-strong population were evacuated from the rubble-strewn city. With losses normalised, Tracy remains the second-worst insurance event in Australia’s history. According to the Insurance Council of Australia, it would cause an estimated $7.4 billion of insured losses if it occurred today, behind only the 1999 Sydney hailstorm, which would account for $8.85 billion.

Expert George Walker, in his recollections for catastrophe modeller Risk Frontiers, describes how Tracy was initially of little concern. A warning was issued late on Christmas Eve that the cyclone would probably cross the coast near Darwin, but it was not expected to increase in intensity.

“Most Darwin residents, and probably almost everyone in Australia, went to bed on Christmas Eve unaware that before daylight dawned, the city would have been subject to winds the intensity, duration and areal extent of which had not been experienced by any city of similar or greater size anywhere in the world, within the lifetime of most of the residents,” Dr Walker writes.

For reasons “not well understood”, Tracy underwent a rapid intensification and tracked directly over Darwin in the early hours of Christmas Day.

Tracy was small – with an eye diameter of only 8km – but its slow forward speed meant destructive winds were experienced for several hours, and across the whole city.

Senior director at Moody’s Peter Datin says satellite and damage observations indicate the storm was category 4, with sustained 10-minute wind speeds of 159-198km/h, and gusts of 226-280km/h.

Above and top: Darwin residents pick through the ruins. All pictures are from the Museum and Art Gallery of the Northern Territory, which has a permanent Cyclone Tracy exhibition

Dr Datin says residential construction was predominantly timber frame with asbestos cement wall sheeting, also known as “fibro”. About 60% of houses were destroyed and most of the rest were uninhabitable.

Dr Walker writes: “Of greatest concern for the engineers and insurers was that the newer so-called cyclone-resistant houses were the most severely damaged, with close to 100% being destroyed. The intensity of the destruction was more similar to that associated with tornadoes than with tropical cyclones.”

Commercial buildings fared better, but damage was still significant, and communications, water and sewerage systems were impacted.

Dr Walker says the insurance industry was keen to move quickly, having been criticised for its response to floods in Brisbane less than a year earlier. But there were initial issues with inexperienced loss adjusters, and significant underinsurance was found.

He says the losses were “almost inconceivable” to an industry unprepared for a cyclone of this scale.

“Although Cyclone Tracy does not appear to have caused any major failures in the Australian insurance industry, it did stretch the industry to its limit, with reinsurance levels being exceeded in some cases and companies having to rely on reserves to pay the total amount of claims.”

The cyclone makes the cover of Women’s Weekly in January 1975; and one victim’s message of defiance

Reinsurers raised rates, as did insurers, and debate raged about whether such risks were insurable by the private market. A pool solution was investigated but never got off the ground.

“A major factor was probably that in the six years following the announcement of the proposal there were no disasters causing major insurance losses, which allowed time for the insurance industry to get back on its feet and adjust to the new perception of risk by the reinsurance community, and for the public to adjust to the increases in premiums which had followed the events of 1974,” Dr Walker writes.

With the industry retaining responsibility for cyclone and other natural disaster risks, Tracy led to a new era of collaboration between insurers and catastrophe researchers.

“Since the early 1980s, the insurance industry in Australia has become increasingly dependent on scientific and technical expertise in its management of catastrophe risk, and this is a direct consequence of the impact of Tracy,” Dr Walker writes.

“This period led to a fundamental change in the management of catastrophe insurance risk in Australia, embodying leading-edge technological developments arising from scientific and engineering research.

“[This] ensured the Australian insurance industry was well equipped to face future major losses, as has been proved by subsequent major catastrophe insurance loss events such as the 1989 Newcastle earthquake and the 1999 Sydney hailstorm.”

Dr Datin says that while wind loading codes were in place in 1974, with lessons learnt from Cyclone Althea in Townsville three years earlier, they mostly applied to commercial buildings and did not account for horizontal loads.

“A subsequent investigation and findings post-Tracy resulted in notable learnings and improvements to the Australian wind code: namely, fatigue testing of metal roofing under cyclical wind loading, the inclusion of internal wind pressure in the design (accounting for openings such as windows in structures broken due to wind-borne debris), and the inclusion of horizontal wind pressures in the design,” he says.

Improvements resulting from Cyclone Tracy were put to the test in cyclones Larry (2006) and Yasi (2011).

“Most of the damage to residential buildings in these storms was suffered by houses constructed before 1980, while those built to modern codes, incorporating the lessons learnt from Cyclone Tracy, suffered far less damage,” Dr Datin says.

However, there is no room for complacency. Dr Datin says 40%-50% of houses in cyclone-prone areas of Australia were built before 1980.