Opening remarks by ARPC Chief Executive Dr Christopher Wallace
1 July 2026
2026 OECD-ADBI Roundtable on Insurance and Retirement Savings in Asia
Session on innovative approaches to addressing evolving climate risks
Colombo, Sri Lanka
ARPC has published opening remarks delivered by Chief Executive Dr Christopher Wallace at the Organisation for Economic Co-operation and Development (OECD) and the Asian Development Bank Institute (ADBI) Roundtable on Insurance and Retirement Savings in Asia, held in Colombo, Sri Lanka on 2 June 2026.
Introduction
Good afternoon.
Before I begin, I would like to acknowledge that we are meeting here in Sri Lanka following the impacts of Cyclone Ditwah, which struck in late November last year and has had a devastating effect across the country – causing widespread flooding, landslides, and affecting hundreds of thousands of people and communities.
Our thoughts are with those who have lost loved ones, and with the many communities continuing to recover and rebuild.
It’s a stark reminder that the risks we’re discussing today are not abstract. They are real, immediate, and deeply human.
It’s a privilege to contribute to this discussion alongside colleagues working across Asia on disaster risk solutions, particularly given the lived reality here.
I’d like to share Australia’s experience with our Cyclone Reinsurance Pool. Not as a blueprint, but as a practical example of how governments and markets can work together effectively to address a very specific climate risk.
At ARPC, we operate as a public reinsurer with two distinct mandates. For terrorism risk, our role is to provide market capacity. For cyclone risk, the objective is different – to improve affordability and access where they are under strain.
Designing for affordability and resilience
The design of the pool drives everything that follows.
The cyclone pool is a public–private partnership. Insurers interface with customers, while the pool sits behind them, supported by a government guarantee.
The framework is guided by four objectives:
- premiums must be sustainable over the long term
- affordability must be improved for high risk households and businesses
- incentives for mitigation must be preserved
- lower risk customers should not be materially disadvantaged
A key feature of the design is that it removes the cost of capital. The pool is not required to hold capital for extreme losses, and premiums do not include margins for profit, uncertainty or capital costs.
This allows the system to do something private markets often struggle to do: absorb extreme volatility without fully pricing it into premiums.
Targeting affordability through pricing design
An intentional feature of the pool is targeted cross‑subsidisation.
Pricing adequacy declines as cyclone risk increases, meaning higher‑risk households pay premiums below the full technical cost of risk.
This is a deliberate policy choice. It improves affordability where it is most under pressure, but it also introduces ongoing tension around long‑term sustainability.
Improving access to insurance
We are now seeing this design translate into measurable outcomes.
Across northern Australia:
- home insurance premiums in the highest-risk areas have fallen by up to 37%
- reductions of around 17 to 22% are being observed in medium to high risk regions
Availability has also improved, with quote success rates now consistently high.
For small and medium enterprises, premium reductions of up to 34 per cent have been observed in the highest‑risk areas.
These outcomes go directly to the core policy objective: improving affordability and access without displacing private insurers.
Managing volatility in catastrophe risk
Cyclone risk remains inherently volatile.
While average annual losses appear relatively stable over the long term, actual experience varies significantly. Most years are benign; a small number produce very large losses.
This gap between modelled averages and realised outcomes highlights the limits of relying on models alone.
Schemes such as the cyclone pool must therefore be designed to absorb volatility — not just price it.
A recent example was Tropical Cyclone Alfred, which generated around $1.5 billion in losses – the largest event the pool has faced to date.
The government guarantee ensures claims can be met. Just as importantly, modelling indicates that the scheme can recover relatively quickly following large events.
For policymakers, the core question is not whether losses will occur, but how they are financed and smoothed over time.
Climate uncertainty and evolving risk
The volatility reflects a deeper challenge – uncertainty about how cyclone risk will evolve under climate change.
While individual events are becoming more costly, there is not yet clear evidence in Australia of structural changes in cyclone frequency or distribution sufficient to justify a fundamental shift in pricing.
However, uncertainty remains high and climate models do not yet provide the regional precision needed for insurance pricing decisions.
So our approach has been balanced: maintaining current pricing frameworks, stress‑testing models, and working closely with scientific agencies and international partners – including through OECD forums – to track emerging evidence.
Encouraging mitigation
The pool is not just about absorbing risk but also reshaping it.
We have introduced explicit premium discounts for resilience measures such as roof strengthening, improved window protection, and structural reinforcement.
These discounts can materially reduce the cyclone component of premiums.
However, incentives alone are not enough. Uptake depends heavily on how consistently mitigation data is captured and shared across the insurance system.
This has become a practical focus for us – building better data pathways so that mitigation efforts are recognised, not just at the point of purchase, but over the life of a policy.
More broadly, insurance can support resilience, but it must be aligned with building codes, land use planning and engineering standards.
Lessons for policy and regional application
A few practical lessons emerge.
First, cyclone risk looks very different over a 100 year horizon than it does from recent experience, reinforcing the need for long term policy design.
Second, capital structure and government backing are central to managing extreme volatility – often more so than short term pricing adjustments.
Third, the breadth of the risk pool is critical. Narrowing the pool can quickly undermine affordability outcomes.
More broadly, this experience highlights several implications.
Targeted cross-subsidisation can help stabilise insurance markets where risks are highly concentrated, without displacing private insurers. At the same time, affordability and resilience need to be addressed together, focusing on one without the other is unlikely to be sustainable.
Importantly, volatility should not be seen as a failure of the system, but as an inherent feature of catastrophe risk that policy frameworks must accommodate.
Finally, effective solutions take time. In Australia’s case, the cyclone pool reflects multiple reviews and evolving policy approach. Iteration is an essential part of the process. Educating and informing the community on the progress made by the cyclone pool helped to secure the time needed for that policy thinking, too.
Conclusion
The challenge we are discussing today is not unique to any one country.
Australia’s experience shows that progress is possible when the problem is clearly defined, and when governments, insurers and the scientific community work together.
No single lever will be sufficient. But by combining targeted public support, functioning insurance markets and stronger incentives for resilience, it is possible to maintain protection where it is needed most.
As recent events in Sri Lanka have shown, the impacts of these events extend well beyond the initial shock.
The next step is greater regional coordination: sharing data, experience, and practical solutions so that we are not addressing these challenges in isolation.
Events like Cyclone Ditwah remind us that climate risk is ultimately about people, communities, and long-term recovery.
Thank you.
Dr Christopher Wallace’s presentation to the OECD ADBI Roundtable on Insurance and Retirement Savings in Asia is available here.