ARPC has published revised premium rates for the Cyclone Reinsurance Pool (cyclone pool) which commenced operations on 1 July 2022. The new premium rates (premium rates v3.0) will be effective from 1 April 2025, and will replace premium rates v2.0 (effective since 1 October 2022).
2024 Pricing Review Scope
The 2024 Pricing Review of the cyclone pool premium rates targeted the following:
- Ensuring premium rates are still meeting legislative objective for the policies that are now reinsured by the cyclone pool.
- Introduction of premium discounts for strata properties that have undertaken risk mitigation activities.
- Maintenance of the pricing algorithm to:
- Rate new addresses registered since the previous review.
- Address insurer feedback to make the pricing algorithm more consistent with market practice.
The updates to premium rates were subject to an industry consultation process. The feedback from the consultation has been considered as part of this review with changes reflected as appropriate.
2024 Pricing Review Conclusions
The data provided by insurers shows fewer policies to be ultimately reinsured by the cyclone pool than previously modelled (which was largely assumption based), and differences in take up by region and type of coverage. Despite this, analysis detailed in the Premium Determination Report, indicates that the cyclone pool premiums remain adequate overall.
ARPC has reviewed premium rates by cyclone risk level. Current premium rates still achieve overall adequacy while also delivering the most benefit to medium and high risk properties, as intended by the legislation. The changes to the premium algorithm to Strata buildings introduced at this review are expected to incentivise mitigation.
Overall, the conclusion from the 2024 Pricing Review is that the legislative objectives of the cyclone pool continue to be met and, in the case of the strata mitigation discounts, further meet those objectives.
Strata mitigation discounts
Strata premium discounts have been introduced for qualifying mitigation activities, which include:
- Roof mitigation activities (including a full roof structure retrofit, the addition of fastened flashings on metal roofs and sarking under the tiles for tile roofs).
- Installation of permanent protection (for example shutters or screens) on all windows.
- Retrofit of vehicle access doors on low-rise Strata properties (built prior to 1982).
- Installation of gutter overflows.
- External door mitigation activity including solid cores on all timber door and external protection on balcony doors.
Pricing responsibility stays with insurers
Responsibility for setting insurance premiums stays with insurers, and they are responsible for commercial decisions on how they set them. The Australian Competition and Consumer Commission will use its price monitoring powers to collect data to assess whether the savings from the reinsurance pool are being passed through to policyholders.
Please see link to the Premium Determination Report below.