A federal government review of the terrorism and cyclone reinsurance pools is seeking feedback on whether the schemes serve their purpose and if changes are needed.

The cyclone pool review, announced yesterday, is the first since the program began in 2022, while the terrorism scheme has been regularly reviewed since its introduction in 2003.

A cyclone pool consultation paper calls for feedback on the effectiveness of mitigation discounts, whether the two-day cover limit should be extended, and whether the $5 million SME sum insured limit is sufficient.

Financial Services Minister Daniel Mulino says small business marine property insurance will not be added because modelling shows it would have a negligible impact on affordability and could lead to an increase in costs. The government has released an evaluation by actuarial group Taylor Fry that found extending the cyclone pool to incorporate marine assets would be “highly problematic”.

The Australian Reinsurance Pool Corporation had received 111,860 claims with an incurred value of $1.12 billion as of August 31, the consultation paper shows.

For Cyclone Alfred alone, the scheme received 102,636 claims, with ultimate costs expected to total $1.56 billion.

The cyclone hit three months after the last mandated insurer joined the scheme, resulting in the pool entering an accumulated deficit position.

But the paper says the scheme is likely to meet future liabilities from assets held and premium income, and has not had to call on the Commonwealth guarantee or have funds transferred from the terrorism pool.

The ARPC estimates the scheme will return to a positive net asset position early next year, depending on whether there is another large cyclone.

The terrorism pool consultation paper asks if the scheme should be considered a permanent feature of the insurance market and calls for feedback on the purchasing of retrocession cover.

It also seeks input on the claims process, whether the ARPC should share additional data with stakeholders, both in and out of government, and if there should be a dedicated scheme actuary.

ARPC CEO Christopher Wallace says the review is an important step in ensuring the reinsurance pools continue to meet the needs of insurers, businesses and the broader community.

"We encourage all interested stakeholders to participate in the review process and share their views with Treasury," he said.

Submissions close on November 11. Details are available here.