Strata properties in northern Queensland are continuing to face issues gaining insurance as underwriters say the Cyclone Reinsurance Pool is focused on price reduction rather than addressing underlying risks.

Strata and consumer groups have sought answers from insurers over the lack of cover availability in parts of the north, despite the compulsory participation of large underwriters in the pool.

IAG says it is dedicated to providing strata insurance in northern Australia in line with its underwriting guidelines, but the key challenge is the exposure of properties to severe weather events.

“Due to the elevated risk of damage, certain properties may not meet our underwriting guidelines,” a spokesman told insuranceNEWS.com.au. “In addition to the Cyclone Reinsurance Pool, it’s critical the focus remains on increased disaster mitigation initiatives, strengthening of building codes and improved land use planning to reduce the level of risk faced by people and communities.”

The Australian Consumers Insurance Lobby, Unit Owners Association of Queensland (UOAQ), Owners Corporation Network of Australia and NQ Strata Action Group said last week they had sought an explanation from the Insurance Council of Australia on the coverage issues.

“As a committee member of a body corporate in the Whitsundays, we find ourselves with no other option than to secure insurance from an international provider with premiums that are tenfold ... those typically seen in southeast Queensland,” UOAQ Treasurer Bob Boundy said.

“Despite the introduction of the Cyclone Reinsurance Pool, which we hoped would broaden our choices and reduce costs, the anticipated benefits have yet to be realised.”

The previous Coalition federal government, in launching the pool, said it would bring down prices and assist with competition in northern Queensland.

But the Insurance Council says the pool’s design is focused on pricing, rather than risk reduction, and underwriting appetites may not have materially shifted due to factors including flood risks and poor building standards and maintenance.

It’s also impossible to compare prices between northern and southern Australia “because they are fundamentally different risks, which are priced differently”, it says.

Allianz says insurers' risk acceptance criteria are unlikely to change solely because of participation in the pool.

“The pool does not convert a poor-quality risk into a good risk,” a spokesman told insuranceNEWS.com.au. “It does not address broader construction quality concerns in the region, the lack of risk mitigation for flood, or cover for flood unrelated to a cyclone or which occurs after the pool post-cyclone downgrade 48-hour period.”