Insurers have welcomed the Federal Government's $10 billion reinsurance pool for cyclone and cyclone-related flood risk in northern Australia and its $40 million investment in making older strata buildings more resilient to extreme weather events.
The reinsurance pool will cover the cyclone and associated flood risk in home, strata, and small business insurance policies. Meanwhile, the $40 million investment would help the North Queensland Strata Title Resilience Pilot Program to subsidise the cost of cyclone risk mitigation works for strata properties in north Queensland.
In November 2020, insurers engaged industry experts to investigate affordability and availability issues in insurance, including residential customers in Far North Queensland where the costs of cyclone coverage are most acute. It resulted in the establishment of a Reinsurance Pool Working Group (Group) to work through the northern Australia cyclone risks.
Now, the Group will work with the Federal Government's design and consultation process to determine the pool's operation.
Insurance Council of Australia (ICA) chief executive officer Andrew Hall has backed the government's commitment to improving the affordability and availability of insurance for homeowners and small businesses at risk of cyclones.
“Insurers have worked hard for many years in northern Australia to keep premiums affordable and coverage available. However, [the] announcement acknowledges that there are costs driven by some cyclone risks that are significant,” Hall said.
“The industry has done considerable work on the key fundamentals of a public reinsurance scheme, and if properly designed and implemented, a reinsurance pool can put downward pressure on premium costs.
“For some time, insurers have been calling for the expansion of household resilience programs, and so we welcome the $40 million investment to make older strata-owned properties more resilient to extreme weather events.”
Hall advised the government to look at other impediments to lower premiums, including eliminating state insurance stamp duties and levies, improving resilience standards in building codes and land-planning decisions, and lifting investment in mitigation infrastructure and household resilience programs.
IAG managing director and CEO Nick Hawkins has also welcomed the announcement, emphasising that Australia will likely see more frequent and extreme weather events in the coming years – particularly in northern Australia.
“It's critical that people, businesses, and communities can access affordable insurance so they can get back on their feet as quickly as possible,” Hawkins said. “The measures – along with greater investment in mitigation, improved land-use planning, and the strengthening of building codes – will help create stronger, more resilient communities. This, in turn, will help increase the availability of insurance in high-risk areas, improve affordability, and ultimately help save lives and property when disasters strike.”