Billions to flow to consumers as Feds finalise reinsurance pool design

The federal government has finalised the design of a reinsurance pool for cyclone and related flood damage which is expected to put billions of dollars back in the hip pockets of northern Australians, following consultation on the draft legislation.

The federal government has finalised the design of a reinsurance pool for cyclone and related flood damage, which is expected to deliver large premium discounts for Far North homeowners, strata property owners, and small to medium sized enterprises, after consultation on draft legislation.

The expected premium reductions for homeowners in northern Australia will be up to 46 per cent.

The reinsurance pool will be backed by a $10 billion annually reinstated Commonwealth guarantee and be administered by the Australian Reinsurance Pool Corporation.

The reinsurance pool will come into effect from July 1.

More than 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.

Lockhart River on Cape York where Cyclone Trevor crossed the coast on March 22, 2019. SES members from the Cairns region work clearing fallen trees around town. PICTURE: STEWART MCLEAN

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 per cent premium discounts, strata properties up to a 58 per cent discount and SMEs up to a 34 per cent discount.

Prime Minister Scott Morrison said the establishment of a reinsurance pool will 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 the Morrison Government was committed to the benefits flowing through to policyholders as soon as possible and had directed the Australian Competition and Consumer Commission 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,” Mr Frydenberg said.

Federal Leichhardt MP Warren Entsch said he was extremely proud to have played a role in delivering the reinsurance pool for Cairns and Far North Queensland residents.

“I want to make special mention of the critical role Margaret Shaw has played not only in the pool’s design but also its implementation,” Mr Entsch said.

The aftermath of flash flooding is seen at Crystal Cascades Holiday Park, Cairns, Tuesday, March 27, 2018. More than 40 people have been rescued from floodwaters at two Cairns caravan parks as ex-cyclone Nora dropped 100mm worth of rain "in a minute". (AAP Image/Shaz Spannenburg)

“Margaret has been with me on this journey for the past 11-years since this crisis started and it has been her comprehensive knowledge of the insurance industry that has assisted me in identifying solutions.”

Mr Entsch said it was now time the Queensland Government came on-board to further drive down insurance premiums for Far North Queenslanders.

“The Morrison Government has done the heavy lifting, now it is time for the Queensland Government and its four local MPs to start supporting Far North Queenslanders,” he said.

“The Queensland Government now needs to review State Strata Legislation and abolish stamp duty on insurance premium renewals.”

Federal Northern Australia Minister David Littleproud said by reducing insurance premiums in Northern Australia the Morrison Government was removing an obstacle to development so the great potential of the region is achieved.

The Morrison Government intends to introduce legislation for the reinsurance pool in the first week of parliament in February 2022.

Originally published as Billions to flow to consumers as Feds finalise reinsurance pool design