The cyclone pool is designed to lower insurance premiums home, strata and small business policyholders with high cyclone and related flood damage risk by reducing the cost of reinsurance, which is a significant cost component of premiums for these policies.

ARPC is responsible for administering both the Cyclone and Terrorism Reinsurance Pools.

No. The cyclone pool is a reinsurance arrangement between insurers and ARPC.

Insurers with eligible cyclone risks.

Some insurers are not required to join the cyclone pool. The following insurers have the option not to participate: 

• General insurers with total gross written cyclone premiums of less than $10 million for a calendar year prescribed by the regulations (exempt general insurer)
• Lloyd’s underwriters under the Insurance Act 1973 (Cth) and 
• Unauthorised foreign insurers under the Insurance Regulations 2002 (Cth).

Yes. If an insurer meets the premium threshold, they must join the cyclone pool and may incur penalties if they do not.

Insurers with Gross Written Premium over $10 million (for eligible householders, small business, and strata) must join the cyclone pool (not including regions ARPC has specified as exempt by notifiable instrument).

Insurers with Gross Written Premiums of $300 million or more (for the householders class of direct business as defined in APRA GPS001) must join the cyclone pool before 31 December 2023. 

Insurers with Gross Written Premiums of under $300 million (for the householders class of direct business as defined in APRA GPS001) have until 31 December 2024 to join the cyclone pool.

To join the cyclone pool, insurers will have to sign a Reinsurance Agreement with ARPC.

Item 5B(4)(b) of the Insurance Regulations 2002 (Cth) provides cover under home insurance for items that are usually located in the building or at the site but are still insured under the insurance contract when not located at the site.

No. An insurer is obliged under the Reinsurance Agreement to cede all “eligible” policies from their entire book of business for remittance and reporting to ARPC and will not have the option to self-select which policies are covered and which are not.

All Domestic property wholly or mainly residential (Home and Contents and Landlords): No sum insured limit.

Small Medium Enterprise: Max AUD $5 million sum insured limit.

Residential Strata (50% or greater where occupancy is split with commercial) - No sum-insured Limit.

Commercial Strata– Max AUD $5 million sum insured.

If the risk is no longer eligible at mid-term endorsement, the cyclone pool will not cover the risk for the remaining policy term. The insurer should provide the transaction as a pro-rata refund of the ARPC reinsurance premium in the movement report. If the risk becomes eligible mid-term, the cyclone pool will cover the risk from the endorsement date and the insurer should include the risk in the movement file, paying ARPC the reinsurance premium for the remaining policy term.

Insurers will have the option to transition into the cyclone pool using a staggered approach through separate brands and by class of business. ARPC will work with insurers to assist smooth transitioning.

No. ARPC will provide rates to insurers which will have to pay this premium to ARPC. Insurers will continue to set their own premium rates for their consumer policyholders.

Yes. However, ARPC’s Cyclone Reinsurance Agreement will respond before any other reinsurance contract. All eligible cyclone risks are covered under the cyclone pool. Insurers are not precluded from obtaining additional reinsurance from the private market for any retained risks. This ensures all risks held by insurers can have appropriate reinsurance arrangements.

No. Insurers are not required to publish the cyclone reinsurance premium or display the premium on insurance policy documentation. However, the Australian Competition and Consumer Commission (ACCC) will have an ongoing price monitoring role focused on what insurers are charging consumer policyholders.

ARPC will validate the premium submission when insurers submit premium returns. ARPC will also conduct insurer customer audits.

ARPC expects insurers to pro-rata the original policy excess in the same proportion as the claims expense and therefore only recover from the pool the claim amount, minus the apportioned excess.

Where possible, invoices should be allocated to commercial work and residential work. Where this is not possible, ARPC expect insures to assess this in an equitable way between themselves and the cyclone pool.

In the event that SME policies are insured as part of a schedule of many locations and have an aggregate deductible for the purpose of calculating claims then ARPC expect the insurance company to take reasonable steps to allocate the deductible.