A brokerage has told an inquiry that a natural disaster reinsurance pool is the “only credible pathway” to restoring insurance affordability and access in regional Australia.

In a submission to federal parliament’s Joint Committee on Corporations and Financial Services, Ovens Valley Insurance Brokers flags a significant “market failure” in the Victorian tourism hotspot of Bright, resulting in cover becoming unaffordable or unavailable.

One rental property in the town reported a 508% year-on-year price increase at policy renewal – from $4590 to $23,225 – and others have recorded 60%-70% premium rises in recent years, it says.

The broker says rises are hitting residential, accommodation and commercial properties as insurers adopt a blanket approach to high-risk locations such as Bright, rather than assessing individual risk.  

Reinsurer-imposed geographic caps on extreme bushfire risk areas are pushing insurers to withdraw or elevate pricing to unaffordable levels, it warns.

The region also faces flood threats, and insurers are reluctant to take on accommodation risks due to potential business interruptions and total loss exposures amid evacuations.

“The insurance crisis facing Bright is structural, not temporary,” Ovens Valley Insurance Brokers’ submission says. “It is driven by catastrophe modelling, reinsurance dynamics, accumulation limits and capital constraints that are beyond the control of individual property owners.”  

In a separate submission to the inquiry into small business insurance, Alpine Shire Council, which covers Bright, says the broker’s argument is “representative of the conditions experienced throughout the shire”. 

Ovens Valley Insurance Brokers says: “While no single action will reverse this trend, the only call to action is a natural disaster pool, like [the] FNQ cyclone pool, which sufficiently reduced premiums overnight once activated.

“Without systemic intervention, insurance affordability and availability will remain constrained, with significant consequences for regional communities.

“A government-backed solution is required to address this growing national issue surrounding bushfire and flood.”  

The Insurance Council of Australia has previously acknowledged the cyclone pool has provided premium relief but cautioned it is not a solution to broader affordability challenges.

Find the submissions here.

From the latest Insurance News magazine: How "zero progress" on insurance affordability is spurring some levels of government to radical action