Government introduces cyclone reinsurance legislation

The Federal Government this week introduced legislation to establish a reinsurance pool for cyclone and related flood damage in northern Australia.

Written on 10 February, 2022
Allyssa Hextell

The Federal Government this week introduced legislation to establish a reinsurance pool for cyclone and related flood damage in northern Australia.

The pool which is expected to commence from 1 July 2022, will be administered by the Australian Reinsurance Pool Corporation and backed by a $10 billion Government guarantee.

The pool is expected to provide relief for up to 880,000 residential, strata and small business properties across northern Australia. In a statement provided by the Prime Minister, Scott Morrison, it is estimated that homeowners with the most acute cost pressures could benefit from a discount of up to 46 per cent off the premium. Strata properties and SMEs were expected to receive discounts of up to 58 per cent and 34 per cent respectively.

Prime Minister Scott Morrison said the establishment of a reinsurance pool would 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. “This is about making northern Australia even more resilient and liveable,” the Prime Minister said.

The legislation takes into account feedback provided by industry groups, including NIBA, throughout the consultation and design process with several key changes introduced in light of concerns raised over the draft exposure legislation.

The final proposed legislation addresses many of the concerns raised by NIBA in its submission including:

  • increasing the threshold for commercial state building from more than 20% commercial to more than 50% commercial.
  • increasing the sum insured limit for commercial state buildings to $5 million in line with other commercial buildings.
  • a commitment to review the pool after 12 months to consider properties not addressed by the legislation.

Assistant Treasurer Michael Sukkar said “The Government has committed to expanding the pool to provide coverage for small business marine property insurance from 1 July 2023. We have also made adjustments to ensure that more strata properties will benefit from the pool,” Minister Sukkar said.

Importantly, the government has already tasked the Australian Consumer and Competition Commission (ACCC) to undertake price monitoring, to ensure savings realised by the pool are passed on to policyholders.