Draft legislation for cyclone reinsurance pool announced

The Federal Government is one step closer to making the cyclone reinsurance pool a reality with draft legislation released late last week. The pool will be administered by the Australian Reinsurance Pool Corporation (ARPC) and backed by a $10 billion Government guarantee.

The exposure draft and accompanying regulations set out how the cyclone pool will operate and most importantly how the pool will address affordability and availability concerns in Northern Australia.

The proposed legislation mandates participation in the scheme for insurers with more than $10 million GWP who write eligible cyclone risks. The pool will cover 100% of the insurers’ liability for eligible cyclone property losses up to a value of $5 million. This includes strata, domestic household, and small business property losses. Coverage for small business marine property insurance policies will be included from 1 July 2023.

NIBA CEO Philip Kewin said “NIBA welcomes the Federal Government’s release of the draft legislation for the establishment of a reinsurance pool for cyclone and cyclone related flood areas.’’

The government is currently seeking feedback on the draft legislation, with submissions open until 17 December 2021. NIBA will be providing a submission to Treasury on behalf of members and encourages members, especially those with clients in Northern Australia to provide their feedback to NIBA’s Policy Manager, Allyssa Hextell at ahextell@niba.com.au.

“NIBA has played an active role in providing feedback to find a solution that will help make insurance more affordable and available for the many individuals and small businesses in these impacted areas”, Kewin added.

To assist members in providing feedback, NIBA’s legal adviser Mark Radford has prepared a report to assist in identifying any practical or technical issues of concern.