This article provides the latest update about the reinsurance pool legislation.
Following the 30 June announcement by the Hon Stephen Jones MP promising to release of the Cyclone Reinsurance Pool modelling, consumers are no closer to understanding the impacts the Cyclone Reinsurance Pool will have on premiums due to Treasury not releasing important aspects of the modelling.
The Federal government have released rating bands for the Cyclone Reinsurance Pool, this information is available in the Finity report released in early July (Click Here: Cyclone Reinsurance Pool – Summary of the Actuarial Premium Rate Assessment).
The rating released has 23 rating bands A to W based on suburb/postcode – Treasury have released the rates but are yet to release information on what rating bands apply to which suburbs/postcodes. Without this information, consumers are unable to understand the reinsurance rates that apply to their property.
ACIL wrote to Treasury from 1 July to 19 July seeking further clarification of the modelling and we have been advised Treasury are now planning to build a secure online calculator for individual addresses that consumers will be able to access through the ARPC website. ACIL have been advised that building this calculator is likely to take approximately two months, subject to availability of staff and other resources.
“Consumers are eager to understand the impact the reinsurance pool will have on the cost of insurance. The Federal Government have information on ratings applicable to location available that can be released but are yet to release it. Releasing this information may help relieve cost of living pressures by those in Northern Australia so we wonder why little priority is given to releasing this information. We believe the immediate and timely release of this information is important to provide for greater clarity and transparency of the reinsurance pool.” ACIL Chairperson Tyrone Shandiman said.
ACIL wrote to Stephen Jones MP on 22 July asking that Treasury release the full modelling or provide further clarification as to why the Federal Government were withholding the release of rating bands that apply to the varying suburbs. ACIL are yet to receive a response.
What does Modelling say so far?
The modelling released by Treasury provides the following information:
- The Federal Government want to collect $867million per annum in premiums to fund the reinsurance pool.
- QLD, NT, WA and a small portion of NSW (North of Port Macquarie) will contribute to the reinsurance pool. With no contributions made by VIC, ACT, SA, TAS and the majority of NSW (south of Port Macquarie).
- The maximum standard rate for Wind risks is 0.5000 for every $100 insured. This translates to $500 for every $100,000 insured + GST + Stamp Duty & Insurers Margin (say $600-$700)
- The maximum standard rate for Cyclone related flood risks is 0.1000 for every $100 insured. This translates to $100 for every $100,000 insured + GST + Stamp Duty & Insurers Margin (say $120-$140)
- The maximum standard rate for Cyclone related Storm Surge risks is 0.0500 for every $100 insured. This translates to $50 for every $100,000 insured + GST + Stamp Duty & Insurers Margin (say $60-$70)
- Loading and discounting will apply to standard rates for a range of risk factors including but not limited to sum insured, excess, wall & roof construction, age of property & number of stories.
- The premiums shown above are in addition to the insurers standard premiums for all other perils (such as fire, accidental damage, earthquake etc).
Further information about Australian Consumers Insurance Lobby can be found on our website: Australian Consumers Insurance Lobby.
For more information about this media release, contact Tyrone Shandiman on 0419 012 262 or [email protected]
Have a question or something to add to the article? Leave a comment below.
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Tyrone, this is scary. If you take the maximum standard rate to cover all three risks, you have a total of 0.65% plus GST etc, making it about 0.9 % of the total value ($900 per $100,000). This almost doubles the average insurance cost of about 1.2%.
A block of units in a standard area valued at $10,000,000 would see their insurance jump from about $12,000 to $21,000.
Have I read this wrong?
Hi Ross
The rating only applies to buildings with a risk of Cyclone in Northern Australia for example North of Rockhampton where premiums for a $10million building are in excess of $70,000.
In other parts of Australia the charge may be very minimal (for example South East Queensland).