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12 October 2020
The Australian Competition and Consumer Commission (ACCC) should monitor the natural perils component of insurance premiums, while mitigation efforts are also a priority, an interim report from a Senate committee inquiring into last summer’s bushfires has recommended.
Finance and Public Administrative Committee Chairman Tim Ayres, a Labor Senator for NSW, says climate change impacts threaten future premium price rises and also has repercussions for the overall insurance industry.
The report calls for increased mitigation efforts, highlighting that actions should focus on short-term funding for projects as well as longer-term actions to address climate change.
“We are very concerned about evidence that insurance in fire-prone areas is becoming increasingly expensive and could become unavailable unless strong mitigation is undertaken,” Senator Ayres told the Senate last week.
The report proposes the ACCC monitor prices, costs and profits relating to premiums, with particular attention on the impact of climate change-driven severe weather on the natural perils price component.
It says the Australian Prudential Regulation Authority (ARPA) should recommence work on a climate-change related prudential practice and governance guide for the industry, after a suspension due to the COVID-19 pandemic.
APRA should also, if it has not already done so, undertake financial stress testing for worst-case scenario severe weather events causing catastrophic insurance losses.
Other recommendations include that Australia should strengthen its aerial firefighting and ensure improved warning systems.
The interim document, titled Lessons to be learned in relation to the Australian bushfire season 2019/20, was released with a dissenting report by two Liberal Party members and additional comments from senators representing the Greens and Pauline Hanson’s One Nation.
The Royal Commission into National Natural Disaster Arrangements is due to deliver its final report by October 28.