The Royal Automobile Club of Queensland Limited (RACQ) says that, if implemented effectively, Australia’s reinsurance pool could result in up to a 20% premium discount for homes in medium and high-risk cyclone areas.
On May 4, 2021, the Federal Government of Australia announced a $10 billion fund in the form of a cyclone reinsurance pool, designed to help drive down insurance premiums in hard-hit regions from Rockhampton to the Cape.
And nw, RACQ has tendered a submission to the Federal Treasury regarding the northern Australia pool, which it says must be well-designed and part of a broader package to offset the price pressures in the disaster-prone region.
RACQ is a mutual organisation and Queensland’s largest Club, providing roadside assistance, insurance, banking, travel and more to its approximately 1.75 million members.
More than 500,000 residential, strata and small business property insurance policies in Northern Australia are expected to be eligible to be covered by the recently announced reinsurance pool, which could reduce premiums by more than $1.5 billion over 10 years.
The scheme will also see the government invest $40 million in making older strata buildings more resilient to extreme weather events.
RACQ says its submission will advocate for the best solution for its members with a promise to return any savings from the pool through reduced premiums.
Key submission points include mandatory national participation from insurers, the inclusion of cyclone related flooding and storm surge, a suitable transition period, pricing at individual property level, coverage for landlords, and operation on a continuous basis.
The Club also called for flexibility on the amount of risk retained by insurers to enable the pool to operate efficiently alongside the insurer’s reinsurance market program and to ensure that smaller insurers are not disadvantaged.