Cyclone Reinsurance Pool “found wanting"

North Queensland economic development bodies – Advance Cairns, Greater Whitsunday Alliance and Townsville Enterprise – have united in a bid to reform the Cyclone Reinsurance Pool. As the Far North Queensland region braces for another cyclone which is expected to make landfall later this week, concerns are being raised as to the suitability of the Pool to respond to such events. “Ex-TC Jasper was the first event to test this framework and the pool has been left wanting” said Advance Cairns Chief Executive Officer Jacinta Reddan in a joint statement released last week.  

In their statement, the groups called for a review of the Pool and the extension of the post-cyclone coverage period. Currently the pool provides cover for cyclone and related flood damage including wind, rainwater, rainwater run-off, storm surge, and riverine flooding from the time a cyclone event is declared by the Australian Reinsurance Pool Corporation (ARPC) until 48 hours after the cyclone ends.  

Following reports of extensive flooding that occurred outside of the 48-hour period covered by the Pool, the peak bodies have called into question whether its design is fit for purpose. “Our concern from the beginning has always been that a 48-hour rule would not be sensible to address the unpredictability of weather events, including impacts from flooding,” said Townsville Enterprise CEO, Claudia Brumme-Smith. 

Other stakeholders have expressed similar concerns over the 48-hour damage period's ability to cover a high enough portion of claims to deliver the level of premium savings promised by the previous government.  

In a submission to the 2022 Senate review of the Cyclone Reinsurance Pool legislation, NIBA noted that the 48-hour damage period “fails to take into consideration the extensive damage caused to other parts of Northern Australia by ex-Cyclones as they move across the country” and recommended that the post-cyclone coverage period be extended.  

In addition to the extension of the post-cyclone coverage period, the statement also calls for the extension of the Pool to include non-cyclone related flood damages, insurance incentives for policyholders who undertake household mitigation works, greater investment in both community and household level disaster mitigation, improved building codes, and the removal of “unfair” government taxes and charges on insurance policies.  

In response to the concerns raised, the Assistant Treasurer and Minister for Financial Affairs, Stephen Jones, announced he is open to the possibility of bringing the planned review of the Pool forward from 2025 to later this year.