The cyclone reinsurance pool is delivering targeted premium relief and should continue, but it will not solve broader affordability issues, the Insurance Council of Australia says in a review submission.

ICA says the government should be cautious about extending the pool’s cover period – noting members hold various views – and suggests the scheme take a greater role in supporting mitigation. 

“Insurers are passing on savings from the [pool] to policyholders, who are seeing improvements in insurance affordability and availability, particularly in areas facing the highest cyclone risk,” deputy CEO Kylie Macfarlane said.

“But more work must be done to better align the [pool] with risk mitigation by leveraging data on what works and investing in risk mitigation.”

Treasury is conducting its first cyclone pool review since the scheme’s 2022 introduction, alongside a regular terrorism scheme assessment. The Australian Reinsurance Pool Corporation oversees both programs.

ICA proposes refinements to prevent methodology complexities hindering new entrants and says pool data could help build a shared evidence base that supports more accurate, risk-based pricing and individual mitigation efforts.

It says Treasury could consider linking the pool ending with mitigation, while warning unwinding system and reinsurance changes could increase premiums. It says it understands Treasury intends to explore a parliamentary committee proposal for sunsetting coverage on new builds past a certain date.

“This should be done with care to avoid penalising properties built in accordance with approved development processes.

“Any changes to eligibility should be accompanied by improved recognition of mitigation efforts and better data to inform development decisions.”

An Actuaries Institute submission urges caution on extending the post-cyclone cover period, given modelling complexity and uncertainty around related flooding.

“This affects how private reinsurers and insurers assess the flood risk transferred to the pool, and there is some concern that a portion of costs could be borne twice,” the institute said.

It encourages Treasury to consider more detailed modelling, along with stress testing of scenarios and associated loss costs and pricing.

The Financial Rights Legal Centre and Financial Counselling Australia say the pool should not be cost-neutral over the longer-term, allowing for greater investment to reduce premiums.

Their submission backs subsidies for vulnerable consumers in limited circumstances, proposes changes so the ARPC can drive and fund mitigation, and backs a post-cyclone cover period increase to seven days.