Cyclone Reinsurance Pool
Communities in Northern Australia are exposed to extreme and destructive cyclone events when compared to other areas of Australia leading to greater cost to insurers, expensive home insurance and lesser insurance accessibility for people living in the region. Unfortunately, the expectation is that these natural disaster events will continue to increase.
On 4 May 2021, the Australian Government announced its intention to establish a reinsurance pool providing cover for the risk of property damage caused by cyclones and cyclone-related flood damage. The Pool seeks to improve accessibility and affordability of insurance for households and small businesses in cyclone-prone areas, which are mainly located in Northern Australia.
DSH Insurance’s Director, Petra Watson McNamara welcomed the Federal Government’s announcement and acknowledged that communities living in cyclone-prone areas across northern Australia will potentially benefit from greater access to affordable insurance.
‘DSH insurance is supportive of the Government’s policy decision to establish a government backed Cyclone Reinsurance Pool. This will help address affordability of insurance in regions exposed to cyclone risk,’ says Petra.
Large insurers have until 31 December 2023 to join the Pool. Small insurers such as DSH Insurance must have all their eligible cyclone risks reinsured with the ARPC by 31 December 2024.
When will DSH Insurance join the scheme and will the reinsurance pool help reduce the insurance premiums of policyholders residing in cyclone prone areas of Northern Australia?
‘We have a plan ready to action,’ says Petra.
‘DSH Insurance to date has not committed to a participation date but plans to work with ARPC on our approach, in the later part of 2022. We will provide ARPC access to our policy data and current reinsurance information in support of assessing consumer outcomes when applying the Cyclone Reinsurance Pool peril rates. This approach will allow DSH Insurance to calculate pricing impacts to individual policies.’
‘DSH Insurance has committed that it will pass on potential savings in policyholder’s insurance premium once it enters the scheme. DSH Insurance will not be in a position to pass on reduction to premiums from 1 July 2022 as legislation for the cyclone reinsurance pool provides insurers flexibility to transition to the pool – which will affect the timing of savings for consumers,’ confirms Petra.