ICA calls for $2 billion resilience program
The Insurance Council of Australia (ICA) wants governments to commit to one of the country’s largest ever investments in disaster resilience. Timed for the May federal election, the ICA has proposed a $2 billion commitment over the next five years. Just before Australia’s recent flood disaster hit, the ICA’s CEO Andrew Hall explained the Building a More Resilient Australia plan to Insurance Business TV.
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Danny: [00:00:12] Hello and welcome back to Insurance Business TV. I'm Danny Wood, news editor of Insurance Business Australia, and today we're joined by Andrew Hall, CEO of the Insurance Council of Australia. And they've just released a policy proposal that's calling on Australian governments to increase resilience funding together by about $2 billion over five years. And he's here to talk to us about that.
Andrew: [00:00:37] Hi, Andrew. Hi Danny, how are you going?
Danny: [00:00:41] Well, so can you summarize for us what's in your plan?
Andrew: [00:00:46] So the plan we've put forward, it's a actually a comprehensive election platform covering a range of issues and insurance, but the centrepiece relates to a call for a substantial increase in the investment into resilience and mitigation funding by both the Commonwealth and state governments. But given we're heading up to a federal budget and there will be an election as well at the federal level, we are really focused on landing this message with the federal government to provide the leadership across the nation on on massively increasing that that investment in resilience and mitigation
Danny: [00:01:21] And the federal election has to be held by more towards the end of May. Have you had much feedback yet? Presumably they were. Various government officials were aware you were developing this proposal. What's been the feeling from the people in the government?
Andrew: [00:01:37] Yes. Well, I mean, we've been engaging extensively with government over the last 12 months, really increasing the dialogue with them to help them understand about what are the drivers of issues around affordability and availability in certain parts of the country. And when you can understand what those risk drivers are, what is it? What is the role of government in being able to reduce those risk drivers? And in the case of Australia, it really is really is the fact that subsidies sometimes are required to reduce those risks. We need to be able to use government dollars, taxpayer dollars to be able to build local infrastructure that will help mitigate floods, for example. We need to be able to help people, particularly low income people, improve the protection of their housing in vulnerable areas. So there's a range of things that need to be done to reduce the risk and make sure that the market remains sustainable and competitive moving forward.
Danny: [00:02:43] Can you talk us through the sums? How did you arrive at 200 million from the federal government and then two billion collectively over five years?
Andrew: [00:02:51] So we're looking at 200 million per year from the federal government matched by the states and territories. So it's around a $400 million a year spend over five years that comes out at around $2 billion. The work was done by Finity, who went away and studied a range of options. But it's generally generally quite ballpark in the sense that it reflects similar studies that have been done in the past. The most well known was by the Productivity Commission a number of years ago, who they themselves called for around 200 million a year to be invested and moving forward. Subsequent inquiries and others have referenced that increased level of investment and resilience and mitigation in breaking that apart that looked at various components driven by the various perils cyclone, flood, storm, bushfire actions of the sea and the like. And they are looking at what are those the costs attached and the return on investment, and there is a wide range of return on investment in contained within that those buckets. It all depends. Of course, there can be quite subjective on how they're measured, but at the end of the day, nearly every project we put forward, there is a greater return on investment than for every dollar put in. And it really becomes a no brainer that if we want to reduce over time the impacts of extreme weather in this country, we simply have to invest the money up front.
Danny: [00:04:27] One of the programs you're calling for is, I think, just over $500 million in flood leveesaround regional Australia. I mean, what is the situation with flood leveesin regional towns? I mean, generally speaking, how bad is the situation?
Andrew: [00:04:41] Well, yes, it's five hundred and twenty two million dollars for a local infrastructure fund, a very important centrepiece to this in that it provides a bucket for which local communities can go and seek the sort of funding they need to build flood levees. They're generally very expensive pieces of infrastructure, and for that reason, they're relatively slow to get off the ground. And, you know, in times when it's not flooding, they're easily forgotten. It's not like a road where it's always congested and people see the need for a new road. We've got to remind people that floods do happen in some of these communities that are, you know, hundreds of kilometres inland, for example, and they really can benefit from from increased infrastructure spending on things like levees. So there is a wide range. There's a list of communities that we know are very prone to severe flooding, particularly up the East Coast and inland in Queensland. And those are the community. We'd like to see prioritized out of that fund to have those infrastructure build.
Danny: [00:05:51] So how would how would this work in practice, the local city authorities would come and sort of ask the government for some money and the insurance industry would be expected to pitch in to in some way? Or is this purely government subsidized?
Andrew: [00:06:05] Well, they're absolutely local communities everywhere. By and large, you'll find it there are, let's call them shovel-ready plans in a lot of these communities for flood levees. Most of them require a federal and state government commitment to make them happen, including the costs around just finalizing, planning and the like. What we've done in our policy proposal is put put together a bucket of money big enough to cover all that so that rather than starting from scratch and trying to find the money for the the study and the engineering work, and then all that councils working with their state government and the federal can come together and deal with this in a more comprehensive manner and faster. So look, we think that this is the sort of work that needs to be progressed quickly. It's nation building. It protects our our assets and protects communities, particularly in regions that are growing like the mid, north and north coast of New South Wales, south east Queensland and the like. And these need to be actively considered.
Danny: [00:07:09] Another potentially nation building and certainly important measure is a proposal which is which you think needs about four hundred and thirteen million, which is raising utilities above the expected flood lines. Is that is that a novel measure or is that something that's been done before?
Andrew: [00:07:30] Well, it could it would be a novel measure if the if a program is instituted in Australia like that, but it has been done overseas and there are areas that can be looked at to be able to understand the benefit of doing that. And it accepts the fact that where there's been development on floodplains, the cost of relocating a whole suburb is prohibitively expensive and massively dislocating for that community. Instead, why don't we look at how the houses are built? Look at raising them up and putting everything that can be flood affected above the maximum flood line so that when the water passes through the cost of clean up and the like is much lower, the devastation is a lot lower and critical assets are better protected. These are practical, sensible programs that could be put in place and require, I think, government to think about them very carefully and have conversations with those communities.
Danny: [00:08:30] A final measure to talk about is reducing the danger from fire, and you want 712 million to reduce the fuel level in forests. That does sound like a lot of money, but I is that is that another measure that I guess would be a first of its kind for Australia?
Andrew: [00:08:48] Well, we've known for a very long time that fuel managed the fact the fuel management can massively reduce the impact of bushfires. And it was, you know, it was understood fiercely as we came through the 2019 season. And then the royal commission into the bushfire period held a lot of recommendations around controlled burning, managed burning and the like. There is a lot of new ways to be able to run those programs. We're particularly interested in the work that's being done in partnership with indigenous communities to understand traditional burning methods and see if they cannot be undertaken in a more controlled fashion more frequently so that it lessens the impact on the floor and fauna. But it gets critically the fuel load on the forest floor down. And so if a fire does happen, it can be better contained and it's less ferocious and the like. But these are expensive programs to run. The the window in which they can be run in this country is shortening because of the more extended summer seasons. So it's critically important that they're invested in because the nature of the Australian landscape and its uniqueness lends itself to bushfire risk quite heavily at least once every five years. And we need to better plan for that next rotation of that season.
Danny: [00:10:15] Now that you've proposed the plan, what's the next step that you hope will happen to get it moving?
Andrew: [00:10:20] Well, we've been engaging with the government and as well with the opposition, we do have a obviously a budget coming up with it. We're hopeful we can see more of this resilience. Money appear and then there'll be the federal election campaign and I'll acknowledge that the federal government, I think there has been a real shift in how they're thinking about this over the last few years that the the minister responsible is Bridget McKenzie, and she's got an active dialogue with rural and regional communities. So I can say that the government is taking an interest in this. They also have the new reinsurance pool for cyclone risk in northern Australia, and effectively they've got a lot of skin in the game now to see that risk reduction happen. And then on the other side, we've noticed and we're very pleased about how much the opposition have engaged with the insurance sector over recent months to understand the problems, and Labor announced a resilience program which effectively mirrored the $200 million the industry is putting forward. And we welcomed that. So we are seeing now, I think, from both sides a real sense of commitment and movement towards money going into mitigation and resilience rather than what we've had previously, which is a lot of money going into the clean up.
Danny: [00:11:45] Andrew Hall, thanks very much for explaining your building a more resilient Australia plan.
Andrew: [00:11:51] Thanks for your time. My pleasure.
Danny: [00:11:53] And Andrew Hall is CEO of the Insurance Council of Australia. You've been watching insurance business TV bye for now.