Insurance Council of Australia CEO Andrew Hall says “some sort of public/private partnership” is likely as the nation faces up to natural disaster risks and rising premiums.

Speaking on a podcast organised by commercial property insurer FM, Mr Hall says action is needed to prevent a predictable cycle of losses and rebuilding.

Asked whether Australia might see a “stronger hand from states or governments in insuring climate risk”, Mr Hall says there are “a number of models around the world” that provide learnings.

“I think Australia is relatively late to the party on working on that. We do have a cyclone reinsurance pool. I think the big mistake made with that was there was no direct linkage to risk reduction.  

“What we are trying to learn from is other markets, like, for example, the United Kingdom, where there is the flood scheme that sits behind homes. We’ve looked at the US flood model, which is horrifically expensive and one we would not want to replicate here. But there are lessons to be learnt.  

“I think as we move forward, we will see some sort of public private partnership, but it must be linked to mitigation, and it must have a defined period. The idea is to get rid of these things. If we can reduce the risk, we can normalise the market, and we can share risks like we normally would anywhere else.” 

Mr Hall pays tribute to the Hazards Insurance Partnership (HIP), describing it as a “globally leading initiative”.  

“It’s got an acronym, like everything does in financial services. We very much have become joined at the hip with government on the question of data and peril data.

“We feel as an industry, whatever we can share with government that we know are the risks in this country, government will be getting a much deeper insight into where the challenges are. 

“It's always very hard to bring commercial data together with governments and interpret it correctly and make the right decisions, and then it’s really hard to find the money to commit to doing it, but we simply have no choice.

“Because the problem ... is just going to keep repeating and becoming more and more expensive.”

FM's chief science officer Lou Gritzo told the podcast that the private sector experience backs up the industry's call for greater investment in mitigation.

"When FM clients invest in risk reduction, they reduce their loss exposure to those risks by up to a factor of 30," he said.

"So $1 spent on climate resilience reduces their climate risk exposure by up to a factor of 30. That's a very good use of joint public/private funds. 

"It does require, though, moving beyond thinking about just tomorrow to thinking about the long term future of the economy here in Australia, the long term ability for businesses to succeed, and the overall wellbeing of the public."