Australian insurers warn against cat reinsurance pool
IAG has entered the debate about whether the Australian government should establish a reinsurance pool as a way of reducing household insurance costs for cyclone-prone regions in Northern Australia.
The Australian insurance giant was responding to an interim report by the Northern Australia Insurance Premiums Taskforce on the rising cost of insurance policies for homeowners in the region, given the high number of cyclones that have hit the area in recent years.
The taskforce said that a number of options were on the table, including setting up a reinsurance pool or a mutual cyclone insurer.
The Australian treasury announced the formation of the Northern Australia Insurance Premiums Taskforce on 30 March this year.
IAG said last week (18 August) that it would examine the options put forward in the report, but added that it believed a targeted subsidy would be the best way to reduce insurance costs.
The carrier's personal insurance CEO Andy Cornish called for the grant as an interim solution while a nationally coordinated disaster resilience programme was created.
"We recognise insurance costs in North Queensland have risen over recent years mainly due to the increased frequency and severity of weather events such as Tropical Cyclones Marcia and Yasi," he said.
"IAG will provide a submission to the Northern Australia Insurance Premiums Taskforce and we look forward to the government's final response to the Productivity Commission in due course," he added.
Cornish is not the only one who favours a form of subsidy in the short term. Recent research from the Australian Business Roundtable for Disaster Resilience and Safer Communities demonstrated that targeted resilience investments of A$250mn per year could generate budget savings of A$12.2bn for all levels of government and would reduce natural disaster costs by more than 50 percent by 2050.
The Productivity Commission's final report on Natural Disaster Funding Arrangements recommended increasing funding to the states and territories to A$200mn per year.