For natural catastrophes, the risk data is better than it has ever been, the pricing faithfully reflects it and a growing number of clients cannot pay. That gap now meets a summer shaped by a strengthening El Niño and a reinsurance pool scoped to cyclone, the one peril the Pacific is most likely to quieten.
"Unfortunately, you get a high proportion of perhaps vulnerable people that are in the higher-risk properties," Ross Chambers (pictured), head of long tail at Hutch Underwriting, told Insurance Business in an interview at the recent NIBA Convention.
That is not a pricing failure. It is pricing working as designed but landing hardest on the households least able to absorb it. The Actuaries Institute puts the number of Australian households in home insurance affordability stress at 1.61 million, or 15% of all households, up from 12% in 2023 and 10% in 2022. Those households spend an average of 9.6 weeks of gross income on home insurance, seven times more than households not under stress.
Chambers is clear that the underwriting side will not voluntarily retreat from what it knows.
"At the end of the day, insurers are going to want to use what data they have available to them," he said.
Better flood and bushfire modelling will not be un-learned and no market cycle softens a street-level risk signal back into an affordable premium. If the gap closes, something other than the market closes it.
Chambers points to the Cyclone Reinsurance Pool as the proof of concept and the evidence supports him.
The Australian Competition and Consumer Commission's (ACCC) fifth and final insurance monitoring report, published in June, found the pool is helping to reduce premiums or moderate increases for people in areas at higher risk of cyclones, with the largest reductions going to those at greatest risk. The Australian Reinsurance Pool Corporation's (ARPC) May 2026 Premium Assessment found average home insurance premiums in the highest cyclone risk areas had fallen 37% on average since the pool was introduced.
"We have a system [the reinsurance pool] at the moment that has worked quite well for some previously hard-to-insure or uninsurable risks," Chambers said, when asked by IB if he would support expanding the reinsurance pool to include flood specifically rather than just flooding after a cyclone.
Then comes the figure that frames the whole debate. The ACCC found the households and small businesses receiving the largest reductions represent two per cent of policies nationally. The same report found that around half of the households it surveyed nationwide rated their home insurance as unaffordable or barely affordable.
Everything outside that two per cent band, including virtually all standalone riverine flood exposure in this country, pays what the models say.
Chambers' view is supported by some big industry players and also on the consumer side.
The Australian Consumers Insurance Lobby (ACIL) has long advocated for expanded pool eligibility across more property types, the inclusion of additional perils including flood and bushfire and greater government support for mitigation. That is close to Chambers' position almost peril for peril.
Allianz has been the most consistent insurer voice. Chief corporate affairs officer Nicholas Scofield told Insurance Business that "Allianz is of the view that the government should provide subsidised reinsurance through the ARPC for flooding everywhere in Australia." Managing director Richard Feledy later told a parliamentary inquiry: "Certainly, as an organisation, we fully support the extension of that pool into high risk existing properties."
Read next: Allianz says government's reinsurance pool should cover floods
Rather than stretching the existing cyclone pool, Allianz favours a purpose-built flood-pooling scheme, as Insurance Business reported in July 2026. That is a dispute about design rather than about whether pooled reinsurance should reach flood at all.
The Insurance Council of Australia (ICA) sits on the other side. In its November 2025 submission to the statutory review of the Terrorism and Cyclone Insurance Act 2003, the ICA said it cautions against any expansion that may distort risk signals and warned that government-backed reinsurance pools established without a link to mitigation and resilience can mask the true cost of risk. The same submission noted that insurers continue to purchase flood cover in the commercial market, particularly for flood events occurring outside the 48-hour window currently covered by the pool.
That argument has real force. Subsidise the premium without reducing the hazard and you underwrite development where nothing should be built. Chambers does not dispute the mitigation case. He argues the mechanism should go wider anyway.
"There is a good argument to expand that reinsurance out to other exposures where we can," he said.
The timing gives the question urgency. The ACCC’s monitoring role over the pool concluded with that June 2026 report, leaving the statutory review as the remaining formal accountability mechanism. That review, announced by the Minister for Financial Services Daniel Mulino, opened in September 2025 and closed submissions in November that year. Treasury has not yet reported.
The coming summer could sharpen the scope question rather than settling it. In the US, NOAA’s Climate Prediction Center said on Thursday that El Niño continues to strengthen, with a strong-to-very strong event likely through January to March 2027. Here in Australia, the Bureau of Meteorology expects the tropical Pacific warming to peak in November or December and to stay above El Niño thresholds into autumn 2027. A strong El Niño pushes convection east and away from the Australian region, which tends to suppress cyclone formation rather than drive it.
Read next: ARPC cyclone pool reaches 3.2 million‑property portfolio
The current pool mechanism is for cyclone and cyclone-related flood inside a 48-hour window, which is the exposure the Pacific is most likely to quieten over the next few months. Standalone riverine flood sits outside it entirely and answers to catchment conditions, rainfall intensity and where houses have been built rather than to the state of the Pacific. Bushfire, which El Niño tends to worsen rather than ease, sits outside it too.
The Bureau’s own caution runs underneath all of this: a strong signal in the Pacific does not necessarily mean strong impacts on Australian rainfall and temperature. A quieter cyclone season would leave the pool doing less work precisely while the perils it cannot reach keep pricing at whatever the models say. That could be a case for widening the mechanism, not for winding it back.
