RACQ says cyclone reinsurance pool draft legislation gives only “half the picture”, the July starting date looks doubtful and changes are needed to ensure the arrangements will work effectively for policyholders and the industry.

The Queensland-based insurer says in a submission lodged last month that it understands the pricing formula the pool will use at a property level won’t be available to the industry until April, while RACQ has already started work to place its own catastrophe reinsurance program, which begins mid-year.

“Based on advice the Taskforce has provided to industry on timing of deliverables, it is difficult to see any pathway that would enable the pool to be operating and accessible to insurers on the proposed start date of 1 July 2022,” the submission says.

RACQ, which has made 15 recommendations to Treasury, is “hopeful that a well thought-out, fit-for-purpose pool” can be finalised this year, but says the Government must heighten consultation that is inclusive of the broad industry.

The group’s recommendations include that the catastrophe modelling should be shared with all insurers “as soon as possible”, that reinsurer profit-margin-forgone calculations used in the pricing formula should “have due regard” to current pressures, and that changes are made to improve coverage.

“Primary insurers dealing with the pool now need certainty in exactly what they are seeking from the reinsurance market, the exposure gaps that are left by the pool, and confidence that the pool provides cover as intended with minimal friction costs,” it says.

Draft documents show the pool would cover claims from when the Bureau of Meteorology declares a cyclone to 48 hours after it has been downgraded, but RACQ says the period should instead align with reinsurance practices allowing a nominated seven-day window.

Under the current proposal, most RACQ claims from Cyclone Yasi in 2011 would have been covered by the pool, but in 2013 damage from Cyclone Oswald was mostly experienced more than 48 hours after the system was downgraded and wouldn’t have qualified.

Anchoring a seven-day period to any time when the event was a cyclone would better cover high-loss periods, align with existing practice and meet the objectives of focusing on cyclone-prone regions, the submission says.

RACQ says the pool should also include motor claims, in line with existing reinsurance arrangements, as carving them out would add friction costs and dilute benefits.

The Northern Australia Insurance Lobby (NAIL), representing policyholders, has made seven recommendations for changes.

The group says buildings mainly occupied for accommodation purposes shouldn’t be considered commercial, and the commercial sum insured cap should be raised from $5 million to at least $20 million, and ideally would be unlimited.

NAIL calls for changes to address inequities in strata buildings where there is a mix of housing and commercial usage. The draft laws propose cover where 80% or more of floor space is mainly used for residential purposes, which the group says is too restrictive.

More mechanisms are also called for so consumers most in need are saving at least 50% or ideally are close to parity with consumers in other parts of Australia.

The Insurance Council of Australia (ICA) says its submission remains confidential at this time.

“ICA will continue to work with the Federal Government on the establishment and implementation of the Northern Australia Reinsurance Pool for cyclones and related flood damage,” a spokeswoman said.