Draft laws out on cyclone reinsurance pool

The Federal Government has taken the next step to establish a reinsurance pool for cyclones and related flood damage, releasing draft legislation for the measure. Federal Member for Leichhardt Warren Entsch said legislation would be introduced into parliament in the first sitting weeks of 2022 following the public consultation period. “The pool will improve the accessibility and affordability of insurance for households and small businesses in cyclone-prone areas across Australia,” Mr Entsch said. “It is also expected to increase insurer participation in the Northern Australian market, increasing competition and putting further downward pressure on premiums.” Mr Entsch said the reinsurance pool would be backed by a $10 billion government guarantee and commence on July 1, 2022 for residential, strata, and small business property insurance policies. He said coverage for small business marine property insurance policies would be further developed and included from 1 July 2023. “The reinsurance pool will be mandatory for insurers with eligible risks to participate in, with an 18-month transition period for large insurers and an additional 12 months for small insurers,” he said. “Mandatory participation will ensure the reinsurance pool provides the greatest possible reduction in premiums.” Insurance Council of Australia (ICA) chief executive officer Andrew Hall said insurers welcomed the release of the reinsurance pool draft legislation for review. "We recognise that it is one part of the solution to improving affordability and availability of insurance for those living with the threat of cyclones in northern Australia," he said. "Insurers have worked hard for many years in northern Australia to keep premiums affordable and coverage available. "To create a long-term and sustainable market for insurance, more must be done at all levels to lower the physical risks by improving resilience standards in building codes, reform of unfair state insurance stamp duties and levies, and making better land planning decisions into the future that factor in the climate impacts." The ICA said insurers would need to look into how the model would operate to drive down premiums and improve availability for cyclone and cyclone-related flood and looked forward to further engagement with Government over the next two weeks of consultation on the draft Bill. Mr Entsch said it was anticipated more than 500,000 residential, strata and small business property insurance policies in Northern Australia would be eligible to be covered by the reinsurance pool. The Federal Government will provide $18.4 million over five years to the Australian Competition and Consumer Commission to monitor the premiums of insurance policies covered by the pool from 2022. The ACCC will collect data to evaluate the impact of the reinsurance pool and assess whether the savings from the reinsurance pool are being passed through to policyholders. To view the draft or submit a response click HERE

Draft laws out on cyclone reinsurance pool

Industry Queensland

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