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ACIL Raises Alarm About Inequitable Premium Modelling for Cyclone Reinsurance Pool

The Australian Consumers Insurance Lobby Inc (ACIL) is deeply concerned that residents in Northern Australia are subsidising free cyclone coverage for Southern parts of Australia, despite having a history of cyclones or the potential for future cyclones due to changing weather patterns.

Last month, ACIL released a comprehensive report titled "Under the Lens: ACIL's First Evaluation of the Cyclone and Cyclone-Related Flood Reinsurance Pool." The report highlighted a historical instance from January 1950 when cyclone TC119 initially made landfall on the Gulf of Carpentaria coast and eventually reached Sydney as a category 1 system approximately three days later. ACIL highlights that even though category 1 cyclone events are unlikely to cause significant wind damage, the potential for substantial water damage claims resulting from leaking roofs and buildings underscores the critical need to properly account for such occurrences.

The Cyclone Reinsurance Pool provides cyclone cover to eligible buildings Australia wide, but not all policyholders are required to pay premiums. For instance, on the east coast, only policyholders located north of Port Macquarie are obligated to pay premiums.

ACIL Chairperson, Tyrone Shandiman “Sydney gets free cyclone cover for free, even with its history of cyclone events, leaving North Queensland and Northern Australia to foot the bill. This isn't a matter of North vs South - it's about fairness. If a cyclone were to strike Sydney once more and the city accessed funds from the Cyclone Reinsurance Pool without making any contributions, it would undoubtedly spark outrage in Northern Australia. Our aim is to ensure that the North, already grappling with exorbitant insurance premiums, is not subsidising free coverage for southern regions of Australia that could have a claim.”

ACIL expressed its concerns to Assistant Treasurer Stephen Jones, who represents the Sydney electorate of Whitlam. Regrettably, the initial meeting did not result in a receptive response from the Assistant Treasurer, underscoring the necessity for heightened advocacy and increased awareness regarding this issue. ACIL has also turned to the Joint Select Committee for Northern Australia, pressing an urgent need for a revision of the modelling under the pool.

ACIL remains committed to advocating for a fair and balanced approach to the Cyclone Reinsurance Pool. We call upon the Federal Government and Australian Reinsurance Pool Corporation to review the modelling to ensure a fairer approach to the Pool.

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