Pictured above: Picnic Bay Magnetic Island after Cyclone Althea 1971. Photo Arch Frayley Collection.
The Morrison Government has finalised the design of the reinsurance pool for cyclone and related flood damage, following consultation on the draft legislation.
The reinsurance pool will be backed by a $10 billion annually reinstated Commonwealth guarantee and be administered by the Australian Reinsurance Pool Corporation from 1 July 2022.
Over 880,000 residential, strata and small business property insurance policies in northern Australia are expected to be eligible to be covered by the reinsurance pool for the risk of cyclone and related flood damage.
The pool is expected to reduce insurance premiums by up to $2.9 billion for eligible household, strata and small business insurance policies over 10 years. Homeowners in northern Australia with the most acute cost pressures are expected to benefit from up to 46 percent premium discounts, strata properties up to a 58 percent discount and SMEs up to a 34 percent discount.
Prime Minister Scott Morrison said the establishment of a reinsurance pool would deliver on the Government’s commitment to maximising northern Australia’s potential and to ensure Australians in cyclone-prone areas have access to affordable insurance.
“We’ve listened closely to our team including Warren Entsch and Phil Thompson so we can cut the cost of insurance for households, strata and small businesses,” the Prime Minister said.
“This is about making northern Australia even more resilient and liveable.”
Treasurer Josh Frydenberg said that the Government was committed to the benefits flowing through to policyholders as soon as possible, and had directed the Australian Competition and Consumer Commission (ACCC) to undertake price monitoring.
“As a critical integrity measure, price monitoring by the ACCC will provide transparency on how the benefits of the pool are being passed onto policyholders,” the Treasurer said.
Assistant Treasurer Minister Sukkar said that the Government had listened to the feedback it had received throughout the consultation and design process and has made key changes to ensure the reinsurance pool delivers on its objectives.
“The Government has committed to expanding the pool to provide coverage for small business marine property insurance from 1 July 2023, at which time a Treasury review will be undertaken. We are also ensuring that strata properties will more significantly benefit from the pool,” Minister Sukkar said.
Federal Member for Herbert Phillip Thompson said the milestone had been reached thanks to an incredible amount of community feedback.
“The crippling cost of insurance is an issue that people raise with me every single day – and for property owners to be able to look forward to savings of up to 58 per cent on their premiums is an excellent outcome for our community,” he said.
“There has been market failure in the North when it comes to insurance for far too long, and this will mean insurance companies will no longer have an excuse for charging locals in Townsville the eyewatering premiums we’ve been seeing.
“I know it’s been a long process to work out the details of the pool and I want to thank everyone for their patience and their input while we’ve made sure we put forward something that was really going to make a difference.
“We’ll be monitoring the performance of the pool very closely and I will commit to continuing to work with locals to refine and improve it if needed.”
The Government intends to introduce legislation for the reinsurance pool in the first week of Parliament in February 2022, with the pool on track for the scheduled 1 July start date.