The Cyclone Reinsurance Pool, managed by the Australian Reinsurance Pool Corporation (ARPC), has reached almost 99% coverage of the eligible insured population in northern Australia, based on sum insured or premium, according to the latest data.
This achievement was announced in the Cyclone Reinsurance Pool Premium & Exposure Statistics Report, which highlights the pool’s progress since it was established on July 1, 2022, under the amended Terrorism and Cyclone Insurance Act 2003.
While the cyclone pool operates nationwide, its focus is on supporting cyclone-prone regions by providing reinsurance to insurers active in these high-risk areas.
The pool was created to address issues of affordability and availability of insurance for properties at medium to high cyclone risk, specifically for three categories: household, strata (including residential and some commercial properties), and small to medium enterprises (SMEs).
As of June 30, 2024, the pool had achieved approximately 99% coverage of eligible risks, with the remainder expected to join by the end of the year. Annual in-force premiums for the cyclone pool amounted to $520 million for home policies, $52 million for strata, and $24 million for SME policies.
Additionally, mitigation measures applied to in-force home premiums led to a total of $6 million in discounts.
The ARPC has stated that it will conduct regular pricing reviews to ensure the adequacy of the cyclone pool. These reviews could result in adjustments to future reports as market conditions and data evolve.
The premium formula used by the cyclone pool incorporates discounts for homes that have implemented specific risk mitigation measures. These measures include roller door bracing, window protection, tied-down roofs, new or replaced roofs, and elevated ground floors.
Discounts for roller doors and roof upgrades are only available to properties built before 2012 and 1982, respectively, with more recent constructions already having risk reductions accounted for in the construction year rating.
The report noted that a segment of homes reinsured through the cyclone pool has completed these mitigation measures, qualifying for premium discounts. The ARPC anticipates that this number will grow as insurers enhance their data collection on mitigation practices and as policyholders are incentivized by the cyclone pool premiums to adopt risk reduction strategies.
The cyclone pool was launched to make insurance more affordable and accessible in areas prone to cyclones. With ongoing participation from insurers and increased adoption of mitigation measures, the ARPC expects further developments in the pool’s coverage and premium structure.
The ARPC says that regular assessments will be carried out to adapt to market changes and ensure the pool continues to meet its objectives.
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