The Federal Government has released its first report into the inquiry into the cyclone reinsurance pool in which several recommendations are made which are designed to improve scheme roll-out over the next several years.
The Joint Select Committee on Northern Australia, which conducted the inquiry, makes recommendations that the Australian Government ensures that future releases of modelling are provided well in advance of key dates in the ongoing roll-out of the Cyclone Reinsurance Pool.
“That the Australian Government reviews: the availability and coverage of insurance in Northern Australia, specifically the insured versus the uninsured, including non-participation; and
“the impact of the clause extending the pool’s coverage to 48 hours only after a cyclone has been downgraded on the cost of insurance premiums for Northern Australians, and the availability of insurance in the region as part of the built-in review in 2025, and adjust this clause if necessary.”
In the third recommendation, it said that the Australian Government directs the Australia Competition and Consumer Commission to monitor the cyclone insurance markets in Northern Australia, and report on: instances where thin markets may be impacting both insurance coverage and cost; and market participation, specifically under-insurance and the issue of lack of insurance in some areas.
The fourth recommendation said that the Australian Government should announce a position on the inclusion of marine insurance in the Cyclone Reinsurance Pool.
“Recommendation 5. —that the Australian Government facilitates a coordinated approach to land use planning, building codes, mitigation, and disaster resilience that includes the National Emergency Management Agency and other levels of government.
“Recommendation 6 —that the Australian Government’s 2025 review of the Cyclone Reinsurance Pool considers: evidence and data on whether to ‘sunset’ the Cyclone Reinsurance Pool’s coverage of policies for new builds past a certain date; and how to reinforce the policy objective of the Cyclone Reinsurance Pool to move to parity of cost and access for all Australians.
“Recommendation 7 —that future reviews of the Cyclone Reinsurance Pool consider the sum insured limit under the business property policy. Beyond these areas, the committee does not propose, at this point, making fundamental changes to the design of the pool, because: there was no universal support for the changes proposed, and it is too early to determine whether the pool is fit-for-purpose and effectively meeting its policy objectives.
In October 2022, the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP, referred an inquiry into the operation and implementation of the Cyclone Reinsurance Pool to the committee. The Pool started operations in July 2022.
The committee’s interest in conducting an inquiry into the pool arose because of concerns about: the implementation of the pool to date; the reasons for the slow initial take-up of the pool by insurers; why the pool appears to not yet have reduced insurance premiums for many consumers despite this being its key objective; and relatedly community expectations about the extent and timeframe of the anticipated premium reductions.
The committee says that there will be further opportunity, once all relevant insurers have signed up by the end of 2024, to determine whether the pool is working properly, through a scheduled review of the legislation due to report after 1 July 2025, and at least once every five years subsequently. The committee also intends to consider the operation and implementation of the pool in 2024, once major insurers have joined the scheme.
Participation in the Pool is mandatory for general insurers with eligible policies. Large insurers will be required to join the cyclone pool by 31 December 2023. Small insurers will have to join by 31 December 2024. All insurers can voluntarily join from the commencement date.
