The Australian Reinsurance Pool Corporation (ARPC) has acknowledged the Australian Competition and Consumer Commission’s (ACCC) third insurance monitoring report, which highlights that the Cyclone Reinsurance Pool is contributing to lower premiums in regions at higher risk of cyclones.
The ACCC’s report indicates that the cyclone pool has led to some cost savings for insurers operating in cyclone-prone areas. Insurers have begun adjusting their policies to pass these savings onto consumers.
However, the report also noted that several economic and environmental factors, beyond the cyclone pool, are impacting overall premiums. These factors include the broader hardening of global reinsurance markets, extreme weather events, and rising costs of building materials and labor.
The ACCC compared premiums before and after insurers joined the cyclone pool and evaluated how insurers incorporated the pool’s benefits, including the recognition of cyclone mitigation measures.
Among home and contents policies in medium to high cyclone risk areas that renewed after joining the pool, 27% saw a decrease in premiums. In contrast, only 12% of policies in similar risk areas experienced a premium reduction prior to insurers entering the pool.
Similarly, for strata policies in medium to high cyclone risk areas, 16% experienced premium decreases after joining the pool, compared to 10% before entry.
ARPC chief executive Dr Christopher Wallace (pictured above) responded to the findings, stating that ARPC welcomes the report’s insights into the cyclone pool’s effect on premiums.
“The ACCC provides invaluable monitoring of premium rates and we support any efforts to improve access to affordable insurance for cyclone events,” Wallace said.
Wallace added that ARPC recognizes the economic challenges and the impact of severe weather events on Australians and reiterated the corporation’s commitment to working with insurers.
ARPC aims to offer discounts on cyclone reinsurance premiums for properties undertaking mitigation activities, which is expected to help reduce premiums and enhance resilience in cyclone-affected regions.
The ACCC’s report draws from various data sources, including an analysis of individual policies renewed both before and after insurers joined the cyclone pool, as of Sept. 30, 2023.
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