Article by Charlie Peel courtesy of the Australian.
A $10bn reinsurance pool targeting homeowners in northern Australia is being set up by the Morrison government to drive down skyrocketing premiums that have put cover beyond the reach of tens of thousands of homes and businesses.
The Australian understands the announcement about the pool will be made this week ahead of the federal budget being handed down on May 11.
Premiums to insure a home north of the Tropic of Capricorn can range from $5000 to $10,000 a year because of the risk of cyclones and floods.
“It means people are less inclined to work in the north. A reinsurance pool is something we’ve been working on for a decade now.”
Mr Dwyer said a Townsville home equal in value to a home in Brisbane could cost $5000 to insure, compared with about $1500 in the south.
He said further mitigation work was needed from the state government to help prevent natural disasters, particularly floods.
The reinsurance pool will be similar to the one established under John Howard in 2003 to deal with premium blowouts caused by the threat of terrorism.
The decision comes after a decade of lobbying from business groups in Townsville, Cairns, Mackay and Rockhampton, backed by politicians and advocacy groups including the Local Government Association of Queensland.
Leichhardt MP Warren Entsch would not confirm the announcement but described the situation of home and business insurance in the north as “total market failure”.
He said any reinsurance pool modelled off the terrorism pool would help towards reducing premiums. “I’ve spoken about this consistently and regularly through five prime ministers, five treasurers, and we’ve gone from a serious emerging problem to an absolute catastrophe of market failure,” Mr Entsch said.
“To underwrite it, you’re going to talk about billions because you need the comfort of that behind you. If we do this right, there’s no reason we can’t expand it into bushfire areas and flood areas.”
Townsville-based Nationals senator Susan McDonald said insurance was a key issue that needed to be addressed if the north was to be developed. “There are so many buildings that are underinsured or, worse, not insured at all,” she said. “Part of the government’s northern Australia agenda (recognises) that if you can’t get insurance, you can’t get capital, so it’s game over.”
Following an inquiry in December, Australian Small Business and Family Enterprise Ombudsman Kate Carnell recommended that the Australian Reinsurance Pool Corporation, which oversees the terrorism scheme, be expanded to cover natural disaster cover for commercial property.
An Australian Competition & Consumer Commission inquiry last year found insurance premiums in northern Australia rose 178 per cent in the past decade against 52 per cent elsewhere.
Townsville mayor Jenny Hill told a Senate committee in March that a reinsurance pool would address the issues created by natural disasters.
A 2015 report to the government recommended mitigation measures as a “sustainable way of reducing premiums”.