The cyclone reinsurance pool is bringing significant premium reductions for homeowners in the highest-risk areas and affordability benefits for small businesses, an analysis has shown.

The Australian Reinsurance Pool Corporation says in the top risk areas, home premiums were down by an average of 39% in January compared with pre-pool levels, while SMEs are seeing 31% reductions for building and contents cover.

Quote success rates for home cover have increased across all risk bands, with improvements greatest in high-risk areas, indicating more insurer appetite to provide coverage in cyclone-prone regions, the ARPC says. Success rates – which reflect successful quotes as a percentage of the total attempted – improved to 84% in January in high-risk areas, compared with 66% before the pool. 

“Since its establishment, the cyclone pool has played a vital role in helping ensure households and small businesses in northern Australia are not left behind,” pool corporation CEO Christopher Wallace said.    

“By reducing the reinsurance cost burden for insurers, we’ve seen the pool deliver downward premium pressure, making it possible for more Australians to access the protection they need.”  

The assessment is based on quarterly insurer quote data across seven major brands and covering more than 4500 risk profiles. Findings will inform cyclone pool pricing reviews.  

The APRC conducted its first premium assessment data analysis in January last year.

The Australian Consumers Insurance Lobby has welcomed the downward pressure on premiums, particularly for residents in higher-risk regions long burdened with higher costs.

But it has called for a review scheduled for this year to make improvements. 

Chairman Tyrone Shandiman says actions to consider include adding mitigation and resilience incentives, reviewing rating models to ensure fairness, expanding eligibility to benefit more consumers, and exploring how similar frameworks might address affordability and market failures in areas such as flood and bushfire.

“The reinsurance pool has the potential to be a cornerstone for improving access to affordable insurance in a changing climate – this review is a critical next step,” he said.

The pool launched in July 2022, with large insurers given until the end of 2023 to join and smaller insurers required to participate by the end of last year.