Cyclone insurance premiums to drop in Cairns after reinsurance pool decision

A campaign to drive down insurance costs in cyclone-prone regions has taken a leap forward with draft legislation for new $10bn premium-busting cash pool now complete.

A CAMPAIGN to drive down insurance costs in cyclone-prone regions has taken a leap forward with draft legislation for new $10bn premium-busting cash pool now complete.

The federal government is establishing a reinsurance pool to take on insurance companies’ risk for cyclone damage to, in theory, drastically reduce premium prices.

Leichhardt MP Warren Entsch said the new legislation was out for public consultation and would be introduced to parliament in the first sitting weeks of 2022.

“This is something that’s never been done before, so it was always going to take time,” he said.

A $10bn-plus reinsurance pool is set to come online in July 2022.

The date is set for the reinsurance pool to come online in July next year for residential, strata, and small business property insurance policies.

Coverage for small business marine property policies will be further developed and covered from July 2023.

Larger operators are not included – bad news for the Reef Hotel Casino whose premiums shot up 60 per cent, or $487,000, to $1.3 million last year.

However, Mr Entsch did not rule out further expansion of the reinsurance pool down the track.

A sad state of affairs. Picture: Harry Bruce

“As it stands, I think it’s going end up significantly more than $10bn,” he said.

The Australian Competition and Consumer Commission (ACCC) will be given $18.4m over five years to monitor policies and ensure savings are passed on to policyholders.

Those that fail will cop significant fines.

“It’s not an opt-in, opt-out situation,” Mr Entsch said.

“All insurers will be required to participate.

“The biggest benefit I can see is for strata where there has been absolute market failure with premiums going through the stratosphere.”

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Mr Entsch took a dig at Opposition Leader Anthony Albanese and his Cairns-based political team for talking down the plan without offering viable alternatives.

He urged them to call on the state government to remove the stamp duty on renewables to “save 12 per cent straight away off the bottom line” for premiums.

“The second thing they can do is demand the state government amend strata legislation that requires body corporate managers to insure their property for full replacement value,” he said.

“In my own case, that would reduce my premium by half.”

Cairns-based Senator Nita Green said that contrary to Mr Entsch’s comments, Labor had always indicated it would work constructively with the Federal Government on a reinsurance pool.

“I have personally been calling for months for the Government to release details of the Cyclone and related flood damage reinsurance pool so we can understand how much North Queenslanders will save,” Senator Green said.

“While Labor welcomes the release of the draft legislation, it shows the Morrison-Joyce Government is still unable to explain to locals how much relief they will get on their soaring insurance costs.

“Labor will work constructively with the Morrison-Joyce Government on a reinsurance pool to help ease the burden of home insurance costs in Northern Australia.”

However, Senator Green said Labor was also calling for a comprehensive plan that included mitigation, retrofitting houses and a suite of measures to properly address the problem in a region that is prone to cyclones and natural disasters.

It is estimated more than 500,000 residential, strata and small business property insurance policies across Northern Australia will be covered by the reinsurance pool.

More information and details on how to make a submission can be found here.

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Originally published as Cyclone insurance premiums to drop in Cairns after reinsurance pool decision