Cyclone Alfred was a “pivotal” test for the government-backed reinsurance pool, which responded effectively, the program’s administrator says in its annual report.

The pool paid $53.76 million for Alfred claims in the year to June 30, while the overall cost is expected to reach $1.86 billion. Claims from cyclones Alfred, Sean, Zelia, Dianne and Errol are expected to total $1.88 billion.

Australian Reinsurance Pool Corporation CEO Christopher Wallace says the scheme fulfilled its purpose during an above-average season.

“TC Alfred was a pivotal moment for the cyclone pool, serving as a significant test of its resilience and operational effectiveness,” he said. “The event demonstrated the pool’s preparedness and capacity to respond efficiently to significant weather events.”  

The pool, established in July 2022, has so far paid out $147.15 million.

Chair Julie-Anne Schafer says the program is improving insurance affordability and availability.

“There has been a 39% reduction in average home policyholder premiums for the highest-risk areas following commencement of the cyclone pool,” she said. “These findings are a strong signal that our collective efforts are working.”

The ARPC also had 231 terrorism reinsurance agreements in place in the year – up from 225 – providing cover for commercial property and business interruption.

“While the nature of terrorism risk continues to evolve – becoming more complex and less predictable – the terrorism pool remains well positioned to respond to such events,” Dr Wallace said.

Across both schemes, the ARPC had $1.1 billion gross written premium and net assets of $772 million last year, as the terrorism pool position more than offset cyclone liabilities.

An operating deficit of $891 million due to Alfred reflected anticipated cyclone scheme volatility, with claims costs expected to be below premium earned in about four out of five years but significantly higher in one out of five.

“Over time, we expect the pool to be in a deficit position as frequently as it will be in a surplus position, and this is consistent with the design of the pool being cost-neutral over the long term,” the annual report says.