- $10B scheme will underwrite cover for private homes, strata buildings and small businesses
- Additionally, $40M has been allocated to improving resilience of older strata buildings
- News is welcomed by stakeholders, but more details are wanted
The Federal Government has announced a $10 billion reinsurance pool designed to underwrite cover for privately-owned homes, starta corporations and small businesses that are damaged by cyclones and cyclone-related flooding. Australians north of the Tropic of Capricorn are set to benefit from the program.
The Federal Government intends the scheme will cover damage from 1 July 2022.
The Federal Government has also committed to a $40 million investment in improving the resilience of older strata buildings in areas prone to extreme weather events.
Today, the Prime Minister, Scott Morrison, remarked that he expects insurance premiums to fall by out 10% as a result of the pool with 500,000 property insurance policies expected to be covered.
“Homeowners and businesses have been faced with crippling insurance costs, and in some cases, can’t get insurance at all,” he said, adding that the scheme would “encourage more insurance companies into the market.”
Earlier this year, 77 Queensland councils made calls to welcome such a scheme with an inquiry by the Australian Competition and Consumer Commission (ACCC) investigation revealing insurance premiums have increased in Northern Australia by 178% over the past decade – nationally, the average has been about 52%.
Townsville Mayor Jenny Hill is glad the scheme has come to fruition but is waiting to hear more detail about the scheme.
“This reinsurance pool will encourage insurers to re-enter the market in North Australia, providing more options and security to our residents, small business owners and strata title holders. I know those impacted are eager to see the details on how this will be implemented.”
CR Jenny Hill, Townsville Mayor
The Insurance Council of Australia (ICA) has also welcomed the announcement.
“This is a significant commitment by the Federal Government in addressing the shared goal of improving the affordability and availability of insurance for homeowners and small businesses living with the threat of cyclone in northern Australia.
“Insurers have worked hard for many years in northern Australia to keep premiums affordable and coverage available, however today’s announcement acknowledges that there are costs driven by some cyclone risks that are significant.”
Andrew Hall, ICA CEO
The final design of the insurance pool is yet to be determined with Treasury expecting to facilitate a task force in collaboration with the insurance industry. Reportedly, more details of the scheme are expected to be released in the upcoming Federal Budget.