Cyclone Reinsurance Pool: Early Gains, But the Gap Remains Too Wide

The Australian Consumers Insurance Lobby (ACIL) has welcomed the latest findings from the ACCC’s Insurance Monitoring – Fourth Report, which show the Cyclone Reinsurance Pool is starting to reduce the gap in insurance premiums between Northern and Southern Australia. However, ACIL warns that the job is far from done and calls for continued reform to address unaffordable premiums in cyclone-prone regions.

The report highlights early success:

• Home insurance policyholders in the highest risk bands (rating band U & W) are seeing premium reductions above 20%.

• Small and medium-sized businesses (SMEs) in high-risk zones (rating band V & W) are benefiting from reductions of up to 40%.

• On average, homes in medium to high cyclone risk areas received an 11% premium reduction, while homes with nil cyclone risk experienced a 7% increase.

These figures confirm the pool is beginning to rebalance pricing. However, the average premium per $100,000 sum insured in medium to high risk areas still remains more than double that of nil-risk areas — dropping from $701 to $627, compared to an increase from $279 to $299 in nil-risk areas.

“There is now clear evidence the cyclone reinsurance pool is working,” said Tyrone Shandiman, Chairperson of ACIL. “The gap is beginning to narrow — but more must be done to deliver fair and affordable premiums for Australians in disaster-prone regions. We cannot accept the current gap — over 100% — as the new normal.” “What’s missing from the reporting is insight into the most impacted, highest-priced consumers — those who remain unable to afford insurance. We must continue refining the pool to ensure the benefits reach those who need them most.”

A formal review of the Cyclone Reinsurance Pool is scheduled for July 2025, and ACIL will soon make contact with Assistant Treasurer Daniel Mulino seeking clarification on when the review will commence and how it will be conducted.

ACIL is urging that the review focus on four critical areas:

1. Mitigation and Resilience Measures:  Private mitigation efforts paid for by policyholders are not delivering insurance savings. ACIL believes the government should step in with funded or subsidised mitigation programs, and has called on the Queensland Government to invest $100 million of stamp duty revenue into  private cyclone risk reduction in North Queensland.

2. Review of Rates and Regional Equity: Major claims events such as Cyclone Alfred in South East Queensland raise concerns that higher-paying Northern residents may be subsidising other regions. The review must assess if the rates are equitable, particularly in light of the Interdecadal Pacific Oscillation (IPO) — a climate cycle which may shift cyclone risk further south.

3. Expansion of Eligibility: The pool should be expanded to cover currently excluded property types including commercial buildings over $5 million, fixed marine infrastructure, farms, and aged care facilities.

4. Expansion of Perils Covered: Given the progress made on cyclone risk, the government should consider expanding the model nationally to cover other high-cost, risk-priced perils such as flood, bushfire, storm surge, and earthquake.

   
   

“We applaud the progress — but we cannot rest,” Mr Shandiman said. “We need bold action to close the affordability gap, support our most vulnerable communities, and ensure that every Australian has access to fair and affordable insurance.”