The severity and frequency of ongoing bushfires and floods is threatening the creditworthiness of Australia's insurers, governments and banks - with implications for New Zealand's biggest banks.
A report by S&P Global Ratings Australia said Australia-based insurers, governments, and banks should be able to absorb the equivalent of the worst blows from natural disasters over the next two years, but they would need to be prudent in managing risks.
"For insurers, governments, and banks the threat is not new," the global ratings agency said.
"But we believe the physical risks and second order economic knocks from weather events could damage their creditworthiness in our downside scenarios."
Prudent risk management, solid balance sheets and profitability should allow these sectors to manage many weather related events, it said.
"But our sensitivity analysis suggests that the creditworthiness of insurers, governments, and banks would weaken if the frequency and intensity of these events materially increase."
S&P Global Ratings director Sharad Jain said any change in the big banks' ratings would affect New Zealand's big Australian owned banks.
"S&P Global Ratings equalizes its ratings on the major New Zealand banks with those on their respective Australian parents," he said.
"Consequently, we expect that any change in our ratings on an Australian major bank will be mirrored in our rating on its New Zealand banking subsidiary."