The Insurance Council of Australia (ICA) has expressed support for the federal Coalition’s recent proposal to overhaul how the Australian Prudential Regulation Authority (APRA) applies capital requirements to home loans backed by lenders’ mortgage insurance (LMI), as part of a broader push to improve housing affordability and resilience.
Outlined as part of the Coalition’s pre-election policy platform, the proposed change would direct APRA to update its Statement of Expectations, specifically targeting the capital treatment of loans supported by LMI.
Currently, APRA applies different risk weights to home loans depending on whether they are guaranteed by government schemes, parental backing, or insurance – an imbalance the ICA has called on regulators to address.
The Coalition’s proposed policy would allow LMI-backed loans to compete more fairly with those supported by government-backed initiatives.
Welcoming the proposal, the ICA renewed its lobbying efforts in its policy document “Advancing Australia’s Resilience,” urging policymakers to equalise the regulatory capital framework.
It argued that recognising LMI-backed loans on par with those supported by the Home Guarantee Scheme or parental guarantees would reduce inconsistencies and open pathways for more borrowers to enter the property market sooner.
“This announcement is welcome news, not just for the insurance industry, but for those eager to step into the housing market,” said ICA CEO Andrew Hall. “These proposed reforms will be a step in the right direction to allow more Australians to realise the dream of home ownership.”
The policy development comes as the federal government released the 2025-26 Budget, which included additional spending on disaster recovery.
While $1.2 billion has been earmarked for disaster-related payments – including recovery efforts linked to Ex-Tropical Cyclone Alfred – industry stakeholders have flagged concerns about underinvestment in resilience infrastructure.
Among other commitments, the budget allocated $17.7 million for bushfire recovery in regional areas and $5.4 million to enhance emergency broadband capabilities in partnership with state and territory governments.
New South Wales will receive $580 million for flood-resilient infrastructure upgrades, targeting high-risk corridors such as Townson Road, Burdekin Road, and Garfield Road West.
In response, the ICA reiterated its call for the creation of a $30.15 billion Flood Defence Fund, a long-term initiative proposed to be jointly financed by federal and state governments over the next decade.
The National Insurance Brokers Association (NIBA) has echoed the call for enhanced resilience measures. In its own submission to the government earlier this year, NIBA proposed expanding the Disaster Ready Fund, launching a co-funded household resilience program, and forming a national advisory panel on emerging climate and catastrophe risks.
