NIBA submission to consultation paper on cyclone reinsurance pool

NIBA has made a submission in response to the consultation paper: Reinsurance pool for cyclones and related flood damage

Written on 23 June, 2021
Tanaya Das

The National Insurance Brokers Association (NIBA) has made a submission in response to the consultation paper: Reinsurance pool for cyclones and related flood damage.

The submission states that the day-to-day experience of insurance brokers in northern Australia confirms the ACCC report findings that the insurance market in northern Australia is extremely unusual, in that insurance companies are often competing to lose business rather than competing to gain business. It stressed that insurance brokers are consistently reporting extreme difficulty in gaining quotes for property and related risks in northern Australia, and when quotes are available they are invariably extremely expensive.

Author of the submission NIBA CEO, Dallas Booth added that in recent times, high premiums have also been accompanied by high levels of excesses or deductibles, and/or low levels of sub-limits within the policy. His recent discussions with insurance brokers operating in north Queensland and brokers in Western Australia with clients in the far north of the State confirm that these extremely difficult market conditions are continuing.

The submission also noted the government has committed to a government guarantee of the reinsurance pool, but has not committed to funding the pool from revenue or other sources. Therefore it may well be a challenge to significantly reduce premiums in northern Australia, or to make insurance more affordable for those not currently able to insure their property.

NIBA submitted that before serious design, modelling and costing is undertaken, Treasury needs to meet privately with the leading insurance companies and ascertain (no doubt in a commercially confidential manner) what would be the factors and design elements that would encourage the insurers to return to northern Australia and provide cover to the majority of properties on a more competitive basis.

Unless and until this information is known, any model for a reinsurance pool may well fail to gain what insurance brokers and property owners seek most: greater choice of cover, from a competitive insurance market that meets the needs of most property owners.