ACIL urges Cyclone Reinsurance Pool surplus to slash premiums

The Australian Consumers Insurance Lobby (ACIL) is urging the federal government to channel surplus funds from the Cyclone Reinsurance Pool into initiatives aimed at reducing insurance premiums and improving resilience for Northern Australia.

This recommendation was included in ACIL’s recent submission to the government’s Pre-Budget Consultation.

Insurance costs in cyclone-prone areas are significantly higher than in other parts of Australia, with premiums averaging two to three times the rates seen in lower-risk regions and, in some cases, reaching up to 10 times more.

ACIL contends that the growing reserves in the Cyclone Reinsurance Pool offer an opportunity to address these disparities.

“The growth of reserves within the Cyclone Reinsurance Pool provides a critical opportunity for the Federal Government to reinvest in high-risk communities,” said ACIL chairperson Tyrone Shandiman.

He suggested that the government review the pool’s financial position after the cyclone season concludes in April 2025 to assess the feasibility of such measures.

Reducing costs and enhancing resilience 

ACIL has outlined a three-step approach for how the Federal Government can allocate surplus funds to benefit communities in Northern Australia:

• Utilise excess reserves: Surplus funds could help reduce premiums and finance resilience programs once reserves are sufficient to cover claims sustainably.
• Target premium relief: Collaborate with the Australian Reinsurance Pool Corporation (ARPC) to reduce premiums in areas where resilience measures have been implemented to lower risks.
• Invest in resilience measures: Support initiatives such as strengthening roofs, managing debris, and securing outdoor structures in high-risk regions to better prepare for future cyclones.

Shandiman emphasised the potential impact of these measures, including enabling the government to provide immediate financial relief while enhancing the long-term resilience of cyclone-affected communities.

“Reinvesting surplus funds, particularly as reserves grow, is essential to deliver both premium reductions and meaningful resilience improvements for Northern Australia,” he said.

Cyclone Reinsurance Pool rate adjustments

ACIL’s proposals coincide with recent updates to the Cyclone Reinsurance Pool’s pricing structure.

The ARPC has announced new premium rates set to take effect on April 1, 2025, following its 2024 Pricing Review.

The review resulted in several adjustments, including the introduction of discounts for strata properties that complete risk reduction activities. It also refined the pricing algorithm to incorporate feedback from insurers and include newly registered addresses.

The ARPC confirmed that the revised rates align with legislative requirements and support the pool’s broader goals of affordability and risk management.