The Australian Consumers Insurance Lobby (ACIL) is urging the federal government to clarify whether Northern Australians will be required to subsidise cyclone claims in southern states under the Cyclone Reinsurance Pool.
The consumer advocacy group has raised concerns following Ex-Tropical Cyclone Alfred’s projected path, which, despite ultimately causing limited damage, exposed potential weaknesses in the risk modelling underpinning the pool.
ACIL warns that Northern Australians – who were meant to benefit from the scheme – could end up covering cyclone losses in Brisbane or even further south.
A major concern for ACIL is whether the government has fully accounted for shifting cyclone risks in its pricing model.
The organisation pointed to the Interdecadal Pacific Oscillation (IPO), a climate pattern that shifts over 15 to 30 years, which some scientists believe entered a negative phase between 2020 and 2022.
Historical records indicate that during the last prolonged negative IPO phase (1947-1976), cyclone activity increased in Southern Queensland and New South Wales, with at least one cyclone reaching Sydney. However, when the Cyclone Reinsurance Pool’s pricing was determined in 2022, this climate shift had not been confirmed.
ACIL argues that if cyclone risk zones have expanded southward, the current pricing model may not reflect this, potentially placing an unfair financial burden on Northern Australians.
ACIL has also raised concerns over areas south of Port Macquarie receiving cyclone coverage under the pool without contributing financially. While policyholders in Northern Australia are required to pay into the scheme, some southern regions receive coverage without an equivalent financial obligation.
To address this issue, ACIL is calling for:
“The Cyclone Reinsurance Pool was meant to improve affordability for Northern Australians, but there is a growing risk that they could end up paying for cyclones in the south,” said ACIL chairperson Tyrone Shandiman.
ACIL is calling on Assistant Treasurer Stephen Jones to provide assurances that Northern Australians will not be left shouldering the financial burden of cyclone claims from other parts of the country.
“The government must ensure the pool operates fairly, with equitable premium contributions and long-term climate factors properly accounted for,” Shandiman said.
Alongside its concerns about the Cyclone Reinsurance Pool, ACIL has also backed Opposition Leader Peter Dutton’s call for structural changes within the insurance industry, citing affordability and market competition issues.
In a formal letter to Dutton, ACIL supported his stance on potential reforms, including the idea of breaking up major insurers if competition concerns persist.
The consumer group argued that the strong reaction from insurers to Dutton’s comments reflects an ongoing reluctance to accept regulatory changes aimed at increasing transparency and affordability.
“Consumers are fed up. The insurance industry has ignored multiple inquiries, obstructed government interventions like the Cyclone Reinsurance Pool, and lobbied against reforms that would protect policyholders,” Shandiman said.
In addition to supporting regulatory changes, ACIL has proposed a $250 million annual Insurance Affordability & Availability Program, calling for insurers to take greater financial responsibility in addressing rising costs and limited coverage options in high-risk areas.
The proposal follows the Insurance Council of Australia’s (ICA) call for a $30 billion government-funded Flood Defence Fund. ACIL argues that insurers, rather than taxpayers, should play a more active role in funding measures to improve affordability.
