Home / Daily / Policyholders raise alert on cyclone pool design
15 October 2021
The Northern Australia Insurance Lobby (NAIL) has sounded the alert over a number of issues they say could reduce the effectiveness of the Government-backed cyclone reinsurance pool.
The policyholder representative group says consultations have raised questions over whether the design will provide relief for some strata developments, the extent of business cover and whether marine insurance will be included.
NAIL Co-Chairman Margaret Shaw says the actual saving generated by the pool will be another test for its success, with savings of 40-60% needed for the most impacted policyholders.
“We have market failure and it has to be properly addressed,” Ms Shaw said. “I’m hoping this cyclone reinsurance pool, designed properly, will help do that for home and contents and strata.”
Discussions in Treasury-led roundtables have included discussions over whether strata buildings that are part of an “accommodation module” will be included. These are often properties leased to holidaymakers and include developments under a company title or under the Corporations Act, such as Hamilton Island.
At Hotel Group, the largest accommodation provider in Airlie Beach, says if the arrangements are not included in the pool, holiday letting will become unviable for northern Australia, significantly affecting the tourism industry.
“The cost of insurance is making the outgoings impossible and unaffordable and is in turn having a significant impact on property values, impacting many mum and dad investors that make up 90-95% of our investors,” MD Jeff Aquilina says.
Stakeholders at the roundtables have expressed concerns that the pool will limit cover to small businesses, creating a two-speed economy between large and small enterprises and leading to inequities and unnecessary complexities, NAIL says.
The affordability and availability of marine insurance in Northern Australia is also being brought to the forefront in discussions.
Cumberland Charter Yachts Director and Boating Industry Association Queensland Council Member Sharon McNally says there are fewer and fewer insurers willing to provide cover.
“Currently there is only one viable insurer that offers charter boat insurance in North Queensland and, if they stop providing insurance or continue to increase premium, it may no longer be viable for many marine businesses in North Queensland to continue operating,” she says.
NAIL says the Federal Government needs to consider not only marine businesses but the many firms that service the industry, with any contraction significant for towns in Northern Australia.
Assistant Treasurer Michael Sukkar says the reinsurance pool, backed by a $10 billion Government guarantee, is on track to commence from July.
The model has been largely decided, with details still being finalised through stakeholder consultations, he told the Insurance Council of Australia (ICA) Annual Industry Forum on Wednesday.
Details are set to be released publicly ahead of the expected introduction of legislation into Federal Parliament early next year, he says.
NAIL says the pool is a step in the right direction to resolving insurance affordability and availability issues, but the design is critical.
“Failure in design will mean that many policyholders will continue to have the same issues and problems that have been brought to the governments attention over many years,” the group says.