ARPC welcomes ACCC report which finds the Cyclone Pool is delivering savings
20 September 2024
Australian Reinsurance Pool Corporation (ARPC) welcomes the release of ACCC’s third insurance monitoring report, which found the Cyclone Reinsurance Pool (cyclone pool) has begun delivering lower premiums in regions facing higher risk of cyclones.
The ACCC’s report recognised that the cyclone pool has resulted in some cost savings for insurers writing policies in higher cyclone risk regions and that insurers are making changes to allow savings they have received from the cyclone pool to better flow through to consumers.
The report also noted that economic and environmental factors beyond the cyclone pool, are influencing the overall premiums facing consumers. These costs include the broader hardening of global reinsurance markets, extreme global weather events, and price increases of building materials and labour.
In its report, the ACCC compared how premiums changed following insurers’ entry into the cyclone pool. It also assessed insurers’ approaches to implementing the cyclone pool, including recognition of cyclone mitigation measures.
Of those policies that had renewed after their insurer joined the cyclone pool, the ACCC found that 27% of combined home and contents policies in areas of medium to high cyclone risk experienced decreases to their premiums. For comparison, for those home and contents policies in medium to high risk areas that renewed before their insurer joined the pool, only 12% experienced a decrease.
Similarly, the ACCC found that 16% of strata policies in medium to high cyclone risk areas experienced a premium decrease upon renewal after their insurer had joined the cyclone pool, compared to 10% that renewed before their insurer had joined the pool.
ARPC Chief Executive Dr Christopher Wallace said: “We welcome these findings on the Cyclone Reinsurance Pool’s impact on insurance premiums. The ACCC provides invaluable monitoring of premium rates and we support any efforts to improve access to affordable insurance for cyclone events.
“We recognise the economic pressures and the continuing impact of severe weather events facing many Australians. That is why we will continue to work closely with insurers to offer discounts on cyclone reinsurance premiums for properties that undertake mitigation activities, which will help reduce premiums and improve resilience in cyclone regions,” Dr Wallace said.
The ACCC’s report uses a range of data sources, including conducting data analysis on individual policies that had renewed both before and after insurer entry into the pool (as at 30 September 2023).
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