I’ve spent my career assessing commercial property risks across a myriad of exposures. Flood zones. Cyclone corridors. Buildings with flammable construction materials that make other underwriters walk away.
But nothing prepared me for what’s happening right now on Australia’s high streets.
Over the past year, I’ve watched 125 confirmed arson attacks tear through Melbourne and regional Victoria. Some groups put the number closer to 250. These aren’t isolated incidents or opportunistic vandalism.
This is organized crime with a business model.
The target? Primarily tobacco retailers and convenience stores caught in what authorities are now calling the Melbourne tobacco wars. The weapon? Firebombs. The collateral damage? Every business unlucky enough to share a wall, a roof, or a street address with the intended target.
And the insurance implications? That’s what keeps myself and many of you up at night.
The Economics Behind the Flames
You need to understand the financial incentive driving this violence because it explains why this problem won’t disappear on its own.
A legal packet of cigarettes carries up to $50 in taxes. Under the counter, that same packet sells for $15. The profit margin on illicit tobacco is staggering, and organised crime syndicates recognised this opportunity over a decade ago.
Victoria Police estimate that one in four tobacco products sold in Victoria comes from the black market. More than 1,000 stores have been identified as selling illicit tobacco products.
When that much money flows through illegal channels, violence becomes a business expense.
The fire bombings serve multiple purposes: eliminating competition, enforcing payment of extortion demands, and sending messages to anyone considering cooperation with authorities. The criminals have calculated that the risk of prosecution is worth the reward.
Your Client’s Shop Just Became a Casualty
Here’s what makes this particularly brutal for brokers and underwriters.
The violence doesn’t respect property lines.
In Coburg, a fire destroyed part of a convenience store and caused $15,000 worth of damage to DJ equipment in an adjacent nightclub. In Fawkner, an arson attack on a smoke shop resulted in heavy damage to a neighbouring family-owned cake shop.
I’m seeing claims involving barbershops, hairdressers, function centres, community halls, and restaurants. Businesses with zero connection to the illicit tobacco trade. Owners who followed every rule, maintained proper security, and did everything right.
Their only mistake? Leasing space next to the wrong tenant.
This creates an underwriting nightmare because traditional risk assessment models don’t account for your neighbour’s criminal enterprise. You can survey a property, evaluate fire suppression systems, review security protocols, and assess the business owner’s track record. None of that matters when organised crime decides the shop next door needs to burn.
The Geographic Spread You Can’t Ignore
If you’re thinking this is just a Melbourne problem, you’re already behind the curve.
The threat is spreading to Queensland, New South Wales, and South Australia. Organized crime syndicates are expanding operations, seeking new territories and markets. The pattern is predictable: establish distribution networks, eliminate competition, enforce compliance through violence.
Brokers across Australia need to reassess commercial property risks beyond Victoria. The question isn’t whether this will impact your region. The question is when.
What Happens When Police Start Writing Letters
In May 2024, Victoria Police took an unprecedented step.
They started sending letters to property owners, formally notifying them and their local councils that their businesses were at increased risk due to the presence of illegal tobacco and vapes on the premises.
Think about what that means for underwriting.
Law enforcement has now formally identified high-risk properties. They’ve documented the threat in writing. They’ve notified property owners and local government authorities.
This fundamentally changes the risk disclosure landscape. Property owners can no longer claim ignorance. Insurers can no longer treat these risks as unknown or unquantifiable.
I’m now asking different questions when I review commercial property applications in affected areas:
- Has the property owner received notification from Victoria Police?
- What due diligence has been conducted on current tenants?
- Are there lease clauses that allow termination based on illegal activity?
- What security measures are in place to monitor tenant operations?
- How quickly can the property owner respond to law enforcement concerns?
These questions didn’t exist in my underwriting checklist two years ago. Now they’re essential.
The Broader Context: Organized Crime’s Insurance Impact
The firebombing crisis sits within a much larger problem.
The Australian Institute of Criminology found that transnational, serious, and organised crime costs Australia up to $68.7 billion each year. That’s not a typo. Nearly $69 billion annually.
In 2023, Insurance Council of Australia members detected $560 million in opportunistic insurance fraud for motor and property claims alone. Undetected fraud costs the industry an estimated $400 million yearly.
But here’s what concerns me more: academic research shows that when insurers successfully reduce opportunistic crime, they’re left facing sophisticated and organized criminal gangs as their main adversaries. These groups adapt strategically, learning from failed attempts and refining their methods.
The criminals are getting smarter. They’re studying how we assess risk, how we process claims, and where our vulnerabilities exist.
How We’re Adapting Our Underwriting Approach
At Australasia Underwriting, we don’t walk away from difficult risks. That’s not who we are.
But we do need to understand them completely.
When I survey properties in affected areas now, I’m looking at factors that weren’t on my radar five years ago:
Tenant mix and due diligence. What businesses operate in the building? What screening process does the property owner use? Are there regular compliance audits?
Proximity to identified risk properties. We’re mapping known illicit tobacco retailers and assessing exposure for neighbouring properties. Distance matters. Shared walls matter more.
Local crime data and patterns. Postcode-based risk modelling has always influenced premiums, but we’re drilling deeper into specific crime types and trends. A general “high-crime area” designation isn’t enough anymore.
Fire suppression and separation. Standard fire protection systems may not be adequate when you’re dealing with accelerant-based attacks. We’re evaluating fire walls, separation between units, and response time for emergency services.
Security infrastructure and monitoring. What surveillance systems are in place? How quickly can suspicious activity be identified and reported? Is there coordination with local law enforcement?
Property owner responsiveness. How quickly does the owner respond to concerns about tenant activity? What’s their track record with law enforcement cooperation? Do they have protocols for addressing police notifications?
The Risk Engineering Advantage
This is where our approach at Australasia Underwriting makes a real difference.
We aim to survey every property risk we underwrite. Our expert surveyors and risk engineers provide detailed advice on risk mitigation. When you’re dealing with organised crime threats, that ground-level intelligence becomes invaluable.
Our surveyors can identify warning signs that might not appear in a standard application: unusual security measures, modified premises that don’t match declared use, patterns of tenant turnover, or physical evidence of illicit activity.
They can also recommend specific mitigation strategies: enhanced fire separation, upgraded surveillance systems, tenant screening protocols, or lease modifications that give property owners better control.
Understanding the impact of risk and mitigating it is the key to our service. This means we’re comfortable operating where others may not be.
What Brokers Need to Do Right Now
If you’re placing commercial property risks in Victoria, Queensland, New South Wales, or South Australia, you need to have different conversations with your clients.
Start with full disclosure. Ask property owners directly whether they’ve received any communication from law enforcement regarding tenant activity or increased risk. Document the response.
Review tenant screening processes. How does your client evaluate prospective tenants? What ongoing monitoring occurs? Are there lease clauses that address illegal activity?
Assess neighbouring properties. Your client’s business might be completely legitimate, but what about the shops on either side? Above? Below? Shared risk is real risk.
Document risk mitigation efforts. What specific steps has the property owner taken to address organized crime threats? Security upgrades, tenant audits, cooperation with police—all of this matters in underwriting assessment.
Prepare clients for market conditions. Premiums will be higher in affected areas. Coverage may come with additional conditions. Some risks may be declined entirely. Your clients need to understand why.
Consider the long-term business impact. Beyond insurance costs, how is organized crime affecting property values, tenant attraction, and business viability? These conversations help clients make informed decisions about their commercial real estate strategy.
Where This Goes From Here
I don’t see this problem resolving quickly.
The financial incentives driving the illicit tobacco trade are too strong. The organized crime networks are too established. The geographic expansion is already underway.
Law enforcement is responding, but the violence continues. Taskforce Lunar has been investigating since organized crime involvement began in 2015. Despite significant police action, the attacks persist.
For underwriters and brokers, this means adapting to a new risk landscape that won’t revert to what we knew before.
We need better data sharing between insurers, law enforcement, and property owners. We need risk assessment models that account for organized crime proximity. We need policy language that clearly defines coverage and exclusions in these scenarios.
Most importantly, we need honest conversations about what risks we can cover, at what cost, and under what conditions.
What I’m Asking From Brokers
If you’re not currently working with Australasia Underwriting, I want you to understand how we’re different.
We don’t shy away from difficult risks. We look at properties with flammable construction materials like EPS. We cover occupations like recycling that other insurers avoid. We write risks in sectors that are traditionally challenging.
But we do it with eyes wide open.
We survey the property. We understand the specific risk factors. We work with the property owner to implement mitigation strategies. We price the risk appropriately. And we explain our reasoning clearly.
When it comes to properties affected by organized crime threats, this approach becomes essential.
You need an underwriter who will take the time to understand the specific situation. Who will send a surveyor to assess the property and neighbouring risks. Who will work with your client to implement security measures that actually reduce exposure. Who will explain why the premium is what it is and what could change it.
That’s what we do.
We’re backed by the strength and stability of Lloyd’s of London. We have an experienced team with decision-making authority. We have dedicated in-house claims expertise. And we have a culture built on ownership, honesty, resilience, innovation, and passion.
Most importantly, we’re committed to clear, prompt, and regular communication. In a market environment where organised crime is literally setting properties on fire, that transparency matters more than ever.
The Conversation We Need to Have
I wrote this because I believe the Australian insurance industry needs to acknowledge what’s happening and adapt accordingly.
The Melbourne tobacco wars aren’t an aberration. They’re a symptom of broader organised crime penetration into Australian commercial life. The fire bombings, the extortion, the violence—this is what happens when illegal enterprises become profitable enough to justify systematic intimidation.
For those of us underwriting commercial property, this creates challenges we haven’t faced before at this scale.
But it also creates an opportunity to demonstrate what professional underwriting actually means: understanding risk completely, pricing it accurately, mitigating it effectively, and communicating transparently throughout the process.
If you’re a broker dealing with commercial property placements in affected areas, let’s talk. I want to hear what you’re seeing on the ground. I want to understand what your clients are experiencing. I want to work together to find solutions that actually work.
Because that’s what we do at Australasia Underwriting. We find solutions.
Even when the high street is on fire.
Derek Harding is the Underwriting Manager of Australasia Underwriting Pty Ltd (AUPL), a national underwriting agency specialising in complex property and casualty insurance. Based in Melbourne, Australia, AUPL works with insurance brokers across the country to find solutions for complex risks.
