A research report from The University of Queensland (UQ) and the Australian Reinsurance Pool Corporation (ARPC) argues that Australia cannot sustain disaster insurance through the private market alone, and sets out four linked trade-offs that governments, insurers, and consumers must work through to keep cover available and affordable as disaster costs rise. The report, Building Resilience: Linking Disaster Insurance and Risk Mitigation for a Sustainable Future, was written by Professor Paula Jarzabkowski, Dr Wendy Pham, and Dr Katie Meissner and published by UQ in January. ARPC sponsored and endorsed it but states the findings are independent research by the UQ authors. Citing Deloitte Access Economics, the report projects that natural disasters will cost Australia at least $73 billion a year by 2060.
The report’s central premise is that disaster insurance is a societal good rather than a purely private financial product, because its benefits and its failures extend beyond the individual policyholder. It links continuous cover to household wellbeing, community recovery, and financial and social inclusion, noting that home insurance is typically a prerequisite for a mortgage and that widespread loss of cover can depress property values and affect an economy heavily exposed to mortgage lending.
The authors frame the market as increasingly strained by rising premiums, insurer withdrawal from high-risk regions, and widening protection gaps that fall hardest on lower-income and culturally diverse households. The report notes about 15% of Australian households are in extreme affordability stress, spending an average of 9.6 weeks of gross annual income to cover their main disaster exposure. It also cites a 2022 study finding that 50% of uninsured people were also disadvantaged on measures of income, background, and education.
The first trade-off concerns how risk is shared between the public and private sectors. The report argues that uninsured risk already sits with government, which acts as insurer of last resort, so the question is not whether the public sector is involved but how and to what extent. It examines Protection Gap Entities (PGEs) – government-legislated bodies such as ARPC, Flood Re in the UK, the California Earthquake Authority (CEA), and the Taiwan Residential Earthquake Insurance Fund (TREIF) – and the design choices they involve: where in the risk-transfer chain the entity holds risk, how much risk is retained by private insurers, and whether the arrangement is permanent, subject to regular review, or given a fixed sunset clause.
The second trade-off weighs risk-reflective pricing, which charges according to a property’s assessed exposure, against solidarity pricing, which spreads costs more evenly across the pool. The report presents each as a choice about who is responsible for risk and who pays for it: risk-reflective pricing signals risk and can prompt mitigation but can price the most exposed out of the market, while solidarity pricing broadens access but can mute the price signal and comes under strain as exposures grow. Australia’s cyclone pool illustrates a solidarity-leaning mechanism; ARPC’s assessment, which tracks standardised new-business quotes from October 2022, records a 37% average fall in premiums in the highest cyclone risk bands over that period.
The third trade-off links financial protection to physical mitigation, and the report identifies it as the area most in need of attention. Its argument carries a direct warning for the market: transferring risk does not reduce it, and neither risk-reflective nor solidarity pricing is sustainable over the long term without lowering physical exposure to loss. On that reasoning, risk-reflective pricing will keep widening the protection gap without mitigation, while solidarity pricing will become unaffordable as more properties turn high-risk. Insurers, the report notes, have historically had few levers to change a property’s risk beyond premium incentives. It points to Australian examples that link the two, including Queensland’s Resilient Homes Fund, which piloted delivering build-back-better grants through homeowners’ insurance claims after the 2022 floods, and the Resilient Building Council’s (RBC) Bushfire Resilience Rating.
The fourth trade-off sets the long-term protection society needs against the fixed-term annual contracts that are the industry norm. Because a typical Australian mortgage runs 30 years while a policy is repriced yearly, the report says households can fall out of cover in any given year through non-renewal or underinsurance – and a household that loses cover can struggle to hold a mortgage or sell the property, devaluing its main financial asset. It sets out three options – voluntary renewal supported by affordable pricing, compulsory cover, and multi-year contracts – and cites multi-year reinsurance arrangements struck by IAG and Suncorp in 2024 and 2025, respectively, as steps some insurers are already taking to manage pricing volatility.
The report presents the four trade-offs as interconnected and sequential rather than independent, arguing that no single solution can satisfy all stakeholders or resolve both sides of any one trade-off at once. Decisions in one area, it says, carry consequences for the others, so stakeholders must weigh what is sacrificed and what is gained at each step. Rather than recommend a model, the report offers the trade-offs as a framework for collaboration among insurers, government, and consumers, and identifies risk reduction as the priority for further research – the entry point, the authors argue, on which the long-term viability of both public and private provision ultimately rests.
