Research Shows Cyclone Pool is Reducing Premiums

An independent analysis of the Cyclone Reinsurance Pool has concluded that it has effectively reduced home insurance premiums and made them more accessible  

An independent analysis of the Cyclone Reinsurance Pool by a USA-based academic has concluded that it has effectively reduced home insurance premiums and made them more accessible to residents in high-risk areas of northern Australia. The report also states that this approach is showing the world what’s possible. 

Mr Adam Solomon, a PhD candidate at the Massachusetts Institute of Technology (MIT), completed his research paper, "Insuring Correlated Climate Risk: Evidence from Public Reinsurance." He used publicly available data to investigate how reinsurance for cyclone risk within the Australian home insurance market can mitigate the impact of extreme weather. 

According to his analysis, as a result of the Cyclone Pool, home insurance premiums decreased by 10 per cent on average and up to 27 per cent for the highest cyclone risk properties, and insurance was now available to six per cent more of the average houses in Queensland and 11 per cent of the highest risk houses. 

Mr Solomon stated that climate change is increasing the frequency and severity of natural disasters worldwide, and it is critical to ensure that people have fairly priced financial protection against these risks through initiatives such as the Australian Government’s Cyclone Reinsurance Pool risks.  

“I think it can be an example to governments in other countries and regions about how to help people obtain fairly priced protection against risks to their livelihoods,” Mr Solomon said. 

Read the research paper here.