The Cyclone Reinsurance Pool (CRP) will commence on 1 July 2022 for residential, strata and small business property insurance policies.

What is the purpose of the CRP?

The Cyclone Reinsurance Pool (CRP) is designed to lower insurance premiums for households and small businesses 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.

What are the goals of the CRP?

The CRP is expected to improve insurance access and affordability in cyclone-prone areas, build the financial capability of affected households and small businesses to recover from natural disasters and support the economic resilience and development of cyclone-prone areas.
The CRP is also expected to increase competition by encouraging greater insurer participation in cyclone-prone areas and support higher levels of insurance coverage by property owners.

What is the role of ARPC?

The CRP is managed by ARPC.

Do consumer policyholders have to join the CRP?

No – the CRP is a reinsurance arrangement between insurers and ARPC.

Who should join the CRP?

Insurers with eligible cyclone risks.

Do all insurers have to join the CRP?

Some insurers are not required to join the CRP. 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 and
  • Unauthorised foreign insurers under the Insurance Regulations 2002.

Is it compulsory to join the CRP?

Yes. If an insurer meets the premium threshold they must join the CRP – they may incur penalties if they do not.

When do insurers have to join the CRP?

Insurers with Gross Written Cyclone Premium of $300 million or more must join the CRP before 31 December 2023.
Insurers with Gross Written Cyclone Premium between $10 million and $300 million have until 31 December 2024 to join the CRP.

How do insurance companies join the scheme?

To join the CRP, insurers will have to sign a Reinsurance agreement with ARPC.

Can insurers choose which risks to cede to the reinsurance agreement?

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.

What classes of business are covered by the pool?

  • All Domestic property wholly or mainly residential (Home and Contents (H&C) & Landlords). No sum insured limit
  • Small Medium Enterprise – Max AUD $5 million sum insured limit
  • Strata:
    • Residential (50% or greater where occupancy is split with commercial). No sum-insured Limit
    • Commercial – Max AUD $5 million sum insured

Do insurers have to transfer all business covered on the same day?

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

Can insurers set their own reinsurance premium rates?

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.

Can an insurer enter into other reinsurance agreements?

Yes. However, ARPC’s cyclone reinsurance agreement will respond before any other reinsurance contract.
All eligible cyclone risks are covered under the CRP. 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.

Do insurers have to disclose cyclone premium rates?

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.

How do insurers know if they have calculated ARPC rates correctly?

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