The Morrison Government has finalised the design of the reinsurance pool for cyclone and related flood damage following consultation on the draft legislation.
The reinsurance pool will be backed by a $10 billion annually reinstated Commonwealth guarantee and be administered by the Australian Reinsurance Pool Corporation.
The reinsurance pool will come into effect from 1 July 2022.
More than 880,000 residential, strata and small business property insurance policies in Northern Australia are expected to be eligible to be covered by the reinsurance pool for the risk of cyclone and related flood damage.
The pool is expected to reduce insurance premiums by up to $2.9 billion for eligible household, strata and small business insurance policies over 10 years.
Homeowners in Northern Australia with the most acute cost pressures are expected to benefit from up to 46 per cent premium discounts, strata properties up to a 58 per cent discount and SMEs up to a 34 per cent discount.
Prime Minister Scott Morrison said the establishment of a reinsurance pool would deliver on the Government’s commitment to maximising northern Australia’s potential and to ensure Australians in cyclone-prone areas have access to affordable insurance.
“We’ve listened closely to our team including Warren Entsch and Phil Thompson so we can cut the cost of insurance for households, strata and small businesses,” Mr Morrison said.
“This is about making northern Australia even more resilient and liveable.”
Treasurer Josh Frydenberg said the Morrison Government was committed to the benefits flowing through to policyholders as soon as possible and had directed the Australian Competition and Consumer Commission (ACCC) to undertake price monitoring.
“As a critical integrity measure, price monitoring by the ACCC will provide transparency on how the benefits of the pool are being passed onto policyholders,” Mr Frydenberg said.
Federal Leichhardt MP Warren Entsch said he was extremely proud to have played a role in delivering the reinsurance pool for Cairns and Far North Queensland residents.
“I want to make special mention of the critical role Margaret Shaw has played not only in the pool’s design but also its implementation,” Mr Entsch said.
“Margaret has been with me on this journey for the past 11-years since this crisis started and it has been her comprehensive knowledge of the insurance industry that has assisted me in identifying solutions.”
Mr Entsch said it was now time the Queensland Government came onboard to further drive down insurance premiums for Far North Queenslanders.
“The Morrison Government has done the heavy lifting, now it is time for the Queensland Government and its four local MPs to start supporting Far North Queenslanders,” he said.
“The Queensland Government now needs to review State Strata Legislation and abolish stamp duty on insurance premium renewals.”
Federal Northern Australia Minister David Littleproud said by reducing insurance premiums in Northern Australia the Morrison Government was removing an obstacle to development so the great potential of the region is achieved.
“This will save households money and give them greater financial freedom and it will give businesses access to more capital to invest and grow,” Mr Littleproud said.
“Northern Australia is particularly prone to extreme weather events and we want to support people and communities to mitigate against the damage that is caused when cyclones and flooding hit the region.
“This investment will give communities confidence the government is backing them to be better prepared.”
Assistant Treasurer Minister Sukkar said the government had listened to the feedback it had received throughout the consultation and design process and has made key changes to ensure the reinsurance pool delivers on its objectives.
“The government has committed to expanding the pool to provide coverage for small business marine property insurance from 1 July 2023, at which time a Treasury review will be undertaken,” Mr Sukkar said.
“We are also ensuring that strata properties will more significantly benefit from the pool.”
The Morrison Government intends to introduce legislation for the reinsurance pool in the first week of Parliament in February 2022.