In recent months, the federal government has ramped up its disaster mitigation and prevention efforts and also reached out to the insurance industry for help. Early in February, federal ministers sat down with five insurance companies for the first Hazards Insurance Partnership (HIP) meeting. HIP is a new initiative chaired by the National Emergency Management Agency (NEMA). The aim is to put downward pressure on insurance premiums and better target mitigation investment.
“It was an excellent start,” said Andrew Hall (pictured above) CEO of the Insurance Council of Australia (ICA), who attended the meeting. “It’s something insurers have been calling on for a very long time, which is, how can we match up both the peril data and the risk with where the investment is needed to start reducing that risk?”
The government has allocated $22.6 million over four years for this purpose.
“We’re at a point where government is doing its thinking about how it will spend the money and what’s the sort of framework for distribution of that money,” said Hall.
He said the ICA and the industry are ready to provide the data to help make those decisions.
“We had both minister Murray Watt there and the assistant treasurer, Stephen Jones,” said Hall. He suggested that having the minister who looks after insurance alongside the minister responsible for resilience at the same meeting was an important step.
“We’re making that direct link now that whatever we spend public money on in terms of building back in disaster affected areas, that we build back differently, that it’s better, that it’s in the right way and it’s out of harm’s way and we can create a community that’s got lower risks and attracts more insurance, not less,” said Hall.
The ICA CEO said the challenging part for HIP is just starting.
“Now the hard part begins, which is really narrowing down the questions the government is seeking to answer with insurers’ help,” said Hall. He said this includes identifying the right data, doing it in a way that doesn’t risk any competition issues and getting to the point where the government can start investing the $200 million a year its earmarked with any matching money from the states and territories.
That $200 million is coming out of the Disaster Ready Fund (DRF), approved in the last budget and the federal government’s biggest financial commitment to disaster prevention and mitigation.
The DRF, also managed by NEMA, will provide up to one billion dollars of federal money over the next five years to help Australian communities protect themselves against the impacts of natural hazards.
Projects include direct investment in what’s called grey and green-blue infrastructure like levees, floodways, seawalls, firebreaks, constructed wetlands and reefs.
The lead emergency management agency in each state and territory, in collaboration with local governments and communities, can apply for the funding. The closing date for the first funding round is March 6.
On its website, NEMA mentions its other collaborative “strategic insurance projects” connected to disaster insurance issues: Developing a national private mitigation measure knowledge base; exploring options for public-private partnerships; creating a data asset on insurance affordability and underinsurance, and; reviewing the standard cover regime and various standard definitions.
The previous federal government’s smaller contribution to disaster prevention efforts in the states and territories – the Disaster Risk Reduction Fund (DRRF) – is still rolling out funds.
This week, the NSW Reconstruction Authority announced $29 million from DRRF. A media release said the money will support more than 60 projects across NSW aimed at mitigating the impacts of future severe weather events and hazards.
Also this week, the federal government announced the extension of disaster assistance to a further seven local councils following extreme rainfall and flooding across Northern and Central Queensland.
“Providing this assistance now will mean that as soon as flood waters recede in these areas, communities can start to recover, assess the damage, and rebuild from these severe weather events,” said minister Watt in a media release.
The expansion of the product follows the firm’s move to join the federal government-backed cyclone reinsurance pool last month. Thousands of Northern Australian policyholders living in high-cyclone risk areas stand to benefit from lower home and contents insurance premiums.