A New South Wales parliamentary committee is due to report in November on options to replace the state’s Emergency Services Levy (ESL), a key milestone in the long-running debate over insurance-based emergency services funding. Ahead of the report, the Insurance Council of Australia (ICA) has warned against policy designs that weaken risk-based pricing signals.
The NSW Legislative Assembly’s Select Committee on Emergency Services Funding Reform is examining five replacement levy model options outlined in a NSW Treasury options paper, with reference to design principles including cost recovery, equity, efficiency, simplicity, and sustainability. Independent MP Jacqui Scruby is chairing the committee, which is due to report by November 18, 2026. The commercial implications are direct. ICA deputy chair Richard Feledy, speaking at the organisation’s annual dinner on July 22, said the current ESL adds between 10% and 34% to the cost of insurance for NSW households, businesses, and motorists. The residential ESL rose 48% from 2017-18 to 2023-24, and NSW remains the only mainland state that has not transitioned to a property-based levy to fund its emergency services. The NSW government has committed to replacing the levy with a charge spread across all landowners, not only the insured.
“After talking about this issue for many years, we now have an opportunity to deliver meaningful reform. We can’t afford to miss it,” Feledy said. He called for bipartisan support and indicated the industry would engage across the Parliament to make its case. Industry bodies have argued for years that moving levy funding away from insurance premiums could improve affordability, reduce underinsurance, and broaden the funding base more equitably. The November reporting deadline makes the second half of 2026 the critical window for that case to land.
Feledy cited $3.8 billion in losses across seven declared events during the past year, covering severe storms and hail in NSW and Queensland, bushfires in Victoria, and flooding in Queensland and the Northern Territory. Subsequent ICA data indicates insured losses from those events have continued to grow. The ICA’s January 2026 release recorded five events totalling $3.49 billion for calendar year 2025, noting claims were still developing. The ICA Data Hub, updated as at May 2026, shows Cat 255 (Queensland and NSW Severe Storms and Hail) had grown to $2.03 billion in incurred losses, with 39.8% of claims still outstanding. Including the January 2026 Victoria Bushfires (Cat 261, $581 million) and subsequent significant flooding events in the Northern Territory and Queensland brings incurred losses across the seven most recent declared catastrophes and significant events to more than $4.2 billion. The Data Hub figures indicate insured losses have continued to increase since the $3.8 billion figure cited in Feledy’s speech.
The longer-term picture reinforces his argument. Over the last 30 years, Australian insurers paid an average of $2.1 billion per year in claims from declared extreme weather events, but that average has more than doubled to $4.5 billion over the past five years, driven largely by the growing cost of flood. Munich Re’s NatCatSERVICE global database shows Australia has ranked second only behind the US for economic and insured losses per capita for most of the past 45 years.
Feledy cautioned against policy interventions that prioritise short-term affordability over actuarially sound risk pricing – a warning with direct relevance to debates already circulating among Australian policymakers. California’s FAIR Plan – the state’s insurer of last resort – has been described by the state’s own insurance commissioner as having revealed “deep flaws in a system that was never designed to bear the weight it now carries,” after insurers were permitted under Proposition 103 to bypass high-risk wildfire areas. The resulting crisis has been attributed to rate suppression – a condition in which the actuarially appropriate rate exceeds the rate regulators approve – which created pricing that did not accurately reflect risk and ultimately drove insurer withdrawal from the market. At least seven of the 12 largest California home insurers had reduced or halted new underwriting in the state by 2022, with wildfire risk costs shifting from high-hazard areas to the broader pool of policyholders statewide.
Australia is navigating analogous questions. In September 2025, Minister for Financial Services Daniel Mulino said there are “aspects” of the UK’s government-backed Flood Re system that his government needs “to look very carefully at,” with ICA CEO Andrew Hall also expressing strong interest – while acknowledging the industry accepts that intervention will be required “at some point” to deal with Australia’s “huge risk peril problem.” Of the 242,000 Australian homes at highest flood risk, 77% lack flood cover, and 70% are in below-median income areas – a protection gap that makes the policy design question consequential. Feledy’s framing positions the ICA’s stance clearly: co-investment in physical risk reduction is necessary and supported, but scheme architectures that mask pricing signals risk repeating outcomes Australia has so far avoided.
Feledy referenced the updated General Insurance Code of Practice as central to the industry's obligations to policyholders during periods of vulnerability. The redraft is at a more advanced stage. Public consultation closed on July 21, 2026, with 28 submissions received. The Australian Securities and Investments Commission (ASIC) lodgement was pushed to the second half of 2026, with an effective start date expected in 2028 to allow insurers time to adapt systems and reissue product disclosure statements.
The draft’s central change is that key insurer obligations would become legally enforceable as part of consumer contracts, subject to ASIC approval. Other proposed changes include automatic acceptance of home and motor claims unresolved after 12 months, a new circumstances-based definition of vulnerability with an Extra Care framework, and broadened family violence protections covering financial abuse and coercion. That enforceability shift converts the code from a self-regulatory instrument to one with direct contractual legal weight – altering claims liability exposure across every subscribing insurer.
The dinner was attended by NSW Treasurer Daniel Mookhey, ASIC chair Sarah Court, Australian Prudential Regulation Authority (APRA) executive board member Suzanne Smith, and representatives from Treasury, the Australian Financial Complaints Authority (AFCA), and the Australian Competition and Consumer Commission (ACCC).
