Industry throws weight behind disaster funding inquiry

Industry throws weight behind disaster funding inquiry | Insurance Business

Industry throws weight behind disaster funding inquiry
A Productivity Commission inquiry into natural disaster funding will consider risk management measures available to asset-owners and options to achieve an effective and sustainable balance of natural disaster recovery and mitigation expenditure, according to the terms of reference released this week.

In authorising the inquiry, Australian Federal Government treasurer Joe Hockey said: “The inquiry should take into account the priority of effective mitigation to reduce the impact of disasters on communities.”

This timely release comes as the debate in the insurance industry over how to help residents in disaster-prone areas rages on.

The industry has welcomed the terms of reference. The Australian Business Roundtable for Disaster Resilience and Safter Communities, which includes IAG and Munch Re, said the inquiry is a positive step, and confirmed it will make a submission.

Speaking on behalf of the Roundtable, Insurance Australia Group managing director and CEO, Mike Wilkins said: “It’s in the interests of all Australians that we change the way we prepare for natural disasters. Improving our national approach to disaster funding makes sense from an economic perspective and it will save lives and property. The  announcement of terms of reference for the Inquiry is a positive step forward.

“I am pleased that the Inquiry will be looking at how we achieve a better balance between investment in disaster mitigation and funds spent on disaster recovery. This is something the Roundtable has been advocating.”

The ICA also praised the terms of reference, and said the organisation and its members look forward to providing submissions.

“The general insurance industry is a strong advocate for government investment in permanent mitigation to lower the impact of extreme weather on vulnerable communities where it is feasible and practical.

“Though disaster response and recovery are an essential component of government relief efforts, the insurance industry believes mitigation infrastructure has long-term benefits for exposed communities and the taxpayer.”

As part of the inquiry, the Productivity Commission will look into the sustainability and effectiveness of current arrangements for funding natural disaster mitigation, resilience and recovery initiatives, as well as the projected medium and long term impacts of identified options on the Australian economy and costs for governments when compared with impacts of the current funding arrangements.

The options for transitioning to and implementing any proposed reforms to funding arrangements will assess the relationship between improved mitigation and the cost of general insurance.

In addition, it will consider the interaction between Commonwealth natural disaster funding arrangements and relevant Commonwealth/state financial arrangements,and options to achieve an effective and sustainable balance of natural disaster recovery and mitigation expenditure to build the resilience of communities, including through improved risk assessments. 

Over the past week, the issue of disaster mitigation and making premiums affordable has reignited on Insurance Business Online, with some brokers making personal sacrifices to help their clients, and several putting forward solutions.

To read the relevant stories, click on the below links:

Brokers side with insurers on premium hikes

Brokers slash their commissions to help clients

To read the full terms of reference, click here.