The Northern Australia Insurance Lobby (NAIL) says the Federal Government cyclone reinsurance pool is unlikely to deliver savings benefits to consumers starting from the previously announced July commencement date as work continues to finalise the details.
NAIL says it understands the Australian Reinsurance Pool Corporation (ARPC) has been consulting bi-laterally with insurers, and is considering feedback on draft reinsurance rates that it issued in late May, while insurers have said it’s unlikely they would be able to implement the pool to consumers on July 1.
Large insurers have until December next year to have all eligible policies transferred into the pool, and NAIL says it expects some will take full advantage of the extended timeframes. Small insurers have until December 31 2024.
“Given the affordability issues being currently experienced, we know this news may come as a disappointment to consumers, particularly as we have been informed some policy holders have altered the expiry of their insurance policies in anticipation of reinsurance pool release,” NAIL Chairman Tyrone Shandiman said.
“Given the lack of affordability of insurance in Northern Australia, we can only hope consumers will receive benefit of the reinsurance pool as soon as possible.”
The Insurance Council of Australia (ICA) says insurers continue to work with the ARPC on aspects of the reinsurance treaty arrangements, including pricing, regulatory frameworks, and alignment with existing commercial reinsurance for non-cyclone risks.
“Further, existing commercial reinsurance treaties will need to be renegotiated,” a spokesperson told insuranceNEWS.com.au. “These negotiations, and the provision of reinsurance pricing, will be required to fully understand the impact on premiums for households and small businesses.”
ICA says the July 1 start date refers to the timing for standing up the reinsurance pool by the ARPC, but the timing of participation is a matter for individual insurers, within the deadlines set by the legislation.
“As insurers continue to work with the ARPC, we look forward to more of the critical operational details, including modelling and reinsurance pricing, being made available,” the spokesperson said.
Federal Parliament passed legislation to introduce the pool, backed by a $10 billion government guarantee, in late March, shortly before former Prime Minister Scott Morrison called the May 21 election.
The explanatory memorandum for the bill said insurers were expected to enter into reinsurance arrangements with the ARPC that take effect from July 1, while giving the later deadlines for obtaining cover with the ARPC for all eligible cyclone risks.
“The legislation delivers on the Government’s commitment to establish a reinsurance pool by 1 July 2022 that will support and protect people in northern Australia,” the former government said in a statement on March 30.
It said the bill established a framework for the ARPC to administer the pool from July, and that it would “now finalise implementation arrangements”.
NAIL has also announced that high-profile campaigner Margaret Shaw has left the group due to personal commitments, with Dawn Romanella, the Asset and Property Manager at Coral Sea Marina Resort in Airlie Beach, appointed to fill the vacant committee position.
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