$ 10 billion reinsurance pool aimed at reducing high cyclone-prone northern premiums QueenslandExperts say that as climate change catastrophes increase, governments will remain open to the face of unexpected cost spikes.
Premiums in northern Queensland have risen dramatically in recent years as cyclones and floods have become more frequent and many have been forced to abandon their insurance altogether.
In Cairns on Tuesday, Prime Minister Scott Morrison unveiled a $ 10 billion government guarantee-backed cyclone reinsurance pool in northern Australia aimed at protecting more than 500,000 assets.
The government expects Pool to reduce premiums by more than $ 1.5 billion over a 10-year period and plans to launch in July 2022.
The government guarantees that insurers will not lose money if they offer insurance products in their area. In essence, the Commonwealth insures insurers from huge losses when they provide accident compensation.
The announcement will be made later Recommended by the Australian Competition & Consumer Commission The government did not use the reinsurance pool last December. The reinsurance pool supports the insurance industry rather than improving affordability.
The exact design of the program has not been announced, but it could be very similar to the design of a terrorist reinsurance pool established after 9/11 to cover the risk of terrorist attacks in the area.
However, the frequency of natural disasters means that the government is exposed to these broader payments than terrorist attacks.
The terrorism reinsurance pool is paid by Australia-wide taxation on all existing insurance.
“this [new] As the number of cyclones increases, the fund will be hit year by year, “said Alan Manning, executive chairman of the insurance consulting business LMI Group.
“We need to consider moving people to safer areas that are not exposed to the direct fires of climate change and building structurally sound buildings, which really mitigates this risk and provides insurance. It lowers fees. At this point, it’s too risky for a private company. “
Due to its location in northern Queensland, the average premium for stratified real estate is $ 6,800 per year, compared to the national average of $ 3,000.
In addition to the $ 10 billion reinsurance pool, the government will provide $ 40 million to subsidize the cost of cyclone risk mitigation work on geological assets in northern Queensland.
Nick Hawkins, Managing Director and CEO of Australia’s largest non-life insurance company, IAG, said the government’s proposed measures are only part of a long-term solution.
“We know that more frequent and intense weather events occur, especially in northern Australia,” he said. “These measures will help build stronger and more resilient communities, as well as increase investment in mitigation, improve land use plans and strengthen building codes.”
Stevie Johnston, CEO of Suncorp, agreed that the measures need to be accompanied by aggressive mitigation measures.
“Australia should focus on disaster mitigation, not disaster cleanup,” said Johnston, adding $ 1 to 97 cents of disaster funding to go to recovery and reconstruction.
Last year, the federal government paid more than $ 4.5 billion in natural disaster relief, following two cyclones, floods and wildfires.
“This reinsurance fund is actually just enough for the two cyclone seasons,” Manning said. “This exposes them to widespread exposure to unforeseen natural disasters. It’s an event we see more and more.”
The· ACCC North Australia Insurance Inquiry Report A subsidy recommended as a tool to reduce premiums, not a reinsurance pool.
“Grants are likely to work in a targeted way to relieve some of the pressure on serious affordability and living expenses,” the report said.
“If the government wants to intervene, we should consider intervening through direct subsidies based on both premium levels and income eligibility requirements.”
The Australian Insurance Council upheld the ACCC findings at the time, but today welcomed the government’s plans for a reinsurance pool.
Coalition’s $ 10 billion plan to curb premium premium growth in Queensland may not improve affordability.Insurance industry
Source link Coalition’s $ 10 billion plan to curb premium premium growth in Queensland may not improve affordability.Insurance industry