The insurance industry has widely rejoiced following the release of the Federal Government’s final design of its reinsurance pool for cyclones and related flood damage in northern Australia.
The Northern Australia Cyclone Reinsurance Pool, administered by the Australian Reinsurance Pool Corporation (ARPC) from July 01, 2022, aims to improve insurance accessibility and affordability for households and small businesses in cyclone-prone areas in Australia.
In 2020, the Australian Competition and Consumer Commission (ACCC) released a northern Australia insurance inquiry to support insurers’ pricing practices after finding that the main driver of premiums in the area was a higher risk of extreme weather from cyclones and cyclone-related floods.
In a statement, the Insurance Council of Australia (ICA) welcomed the final design of the reinsurance pool and ACCC’s ongoing price monitoring role, given its expertise and understanding of the issue.
“Insurers have played a constructive role in the government’s development of a reinsurance pool for cyclone-related risk,” said ICA CEO Andrew Hall. “As the ACCC has previously outlined, those insurers who have remained in the market in northern Australia have done so at considerable cost.”
Insurance Australia Group (IAG) managing director and CEO Nick Hawkins also welcomed the announcement, noting the insurance giant’s research predicting more extreme weather events across Australia as climate change worsens.
“Communities across northern Australia face a high risk of cyclone and cyclone-related flood damage, which is reflected in their insurance premiums. It’s critical insurance is as affordable as possible, so we can help communities recover as quickly as possible when disasters strike,” Hawkins said.
“IAG will continue to work with the Federal Government and the insurance industry on the implementation of the reinsurance pool, and we look forward to seeing the benefits for communities across northern Australia.”
Meanwhile, the Northern Australia Insurance Lobby (NAIL) commended the Federal Government for several key changes:
However, the insurance industry also offered the government tips on improving the Northern Australia Cyclone Reinsurance Pool, including investing in stronger homes and infrastructure to make communities more resilient to worsening extreme weather.
“We must also improve resilience standards in building codes, remove state insurance stamp duties and levies, and make better land planning decisions that factor in worsening extreme weather and its impacts,” Hall said.