Insurers unsure about efficacy of $10bn Cyclone Reinsurance Pool

A new report has highlighted concerning data about the contentious $10bn Cyclone Reinsurance Pool and its inability to reduce costs.

Not one insurer has used the contentious Cyclone Reinsurance Pool as concerns grow about its increasing premiums across Far North Queensland, a report says.

The $10bn scheme was introduced earlier this year and promised affordability.

But a new report by the Australian Competition and Consumer Commission found it had been challenging for insurers to join because of the pool’s claims coverage period and difficulties adjusting existing reinsurance arrangements.

Clifton Sands Holiday Apartment operator Linda St Quintin's insurance premiums have skyrocketed from $8000 to $43,000 since 2013. Picture: Stewart McLean

“Insurers have in both internal and external documents expressed a variety of different views about the pool’s potential ability to reduce input costs and reduce retail premiums in line with the government’s objectives,” the report said.

“A number of insurers were concerned that the pool may increase the overall cost of their reinsurance.”

Average premium prices in northern Australia are almost double national averages in resident combined building and contents, strata, and small business building and contents categories.

Last month the Insurance Council of Australia said modelling indicated up to 24 per cent of residential home policyholders in Queensland with minimal cyclone risk would see premiums increase.

Leichhardt MP Warren Entsch, who has been a key figure lobbying for affordable property insurance, said the findings from the report weren’t reflected in ACCC’s inquiry held in November when insurers agreed the scheme was needed.

Leichardt MP Warren Entsch says changes were necessary to make property insurance more affordable. Picture: Brian Cassey

He admitted changes were crucial to building the reinsurance pool into a successful scheme and that $10bn was not enough to make it so.

“The calculations at the time we found out in the inquiry were reasonably correct but when you start to drill down on it and expand you find there was a relatively small cohort of people to get more of the benefit and a large cohort (that gets less of the benefits),” he said.

Mr Entsch said Allianz was expected to join the scheme in January.

Originally published as Insurers unsure about efficacy of $10bn Cyclone Reinsurance Pool