The Insurance Council of Australia (ICA) has called for a greater emphasis on risk mitigation and climate resilience as the federal government undertakes its first statutory review of the Cyclone Reinsurance Pool (CRP). While the CRP has contributed to lower insurance premiums in cyclone-prone regions since its launch in 2022, the ICA says that sustainable affordability will require coordinated investment in reducing underlying risks.
The review, part of the government’s assessment of the Terrorism and Cyclone Insurance Act 2003, is examining whether the CRP is achieving its objectives of improving access to insurance and lowering costs for communities exposed to cyclones and related weather events. Small business marine property insurance will remain outside the cyclone pool, as modelling suggests its inclusion would have little impact on affordability and could increase costs.
According to the Australian Reinsurance Pool Corporation (ARPC), the CRP has delivered premium reductions of up to 39% for the highest-risk properties. The ARPC also reports a 27% increase in accepted quotes in these areas, indicating improved access to insurance. Since its inception, the CRP has processed more than 9,000 claims, with an incurred value of $121 million and coverage extending to over 3.1 million buildings.
ICA deputy CEO Kylie Macfarlane said policyholders are benefiting from the CRP as insurers deliver cost reductions, especially in regions most exposed to cyclone threats. However, further progress is needed to ensure the CRP is closely integrated with effective risk reduction strategies. “More work must be done to better align the CRP with risk mitigation by leveraging data on what works and investing in risk mitigation. Extreme weather continues to intensify, requiring genuine partnership between government and industry to reduce risks and protect communities,” Macfarlane said.
Despite the reductions in premiums for high-risk properties, the ICA notes that inflation, global reinsurance market dynamics, and operational costs are offsetting some of the benefits. In lower-risk areas, some policyholders have seen premiums increase by 15%.
The ICA’s submission to the review highlights that the CRP alone cannot address all affordability issues and should be part of a broader strategy that includes investment in household and community resilience, as well as mitigation infrastructure. The ICA also warns that government-backed reinsurance pools, if not linked to risk reduction, can mask the true cost of risk and potentially encourage development in high-risk areas.
Flood risk remains a significant concern, with 1.36 million properties across Australia exposed. The ICA advocates for a coordinated approach that combines financial incentives, infrastructure investment, and community engagement to address both affordability and risk. The council supports the government’s $200 million annual commitment to mitigation funding and recommends that this be structured as a rolling, indexed program to ensure long-term impact.
The ICA’s recommendations to the government include publishing relevant government modelling on the CRP’s impacts, clarifying eligibility criteria for consumers, prioritising investment in mitigation and resilience, and approaching any expansion of the CRP with caution to avoid distorting risk signals. The review will also consider the effectiveness of both the cyclone and terrorism reinsurance pools, and whether incentives for risk reduction are being maintained.
The ICA has reiterated its commitment to working with government to ensure the CRP’s effectiveness and to advocate for increased investment in mitigation and resilience. It stresses the importance of ongoing consultation with the insurance sector as the scheme evolves and as new challenges emerge in the Australian market.
Commenting on the review, Dr Christopher Wallace, chief executive of ARPC, said: “This review is an important step in ensuring the reinsurance pools continue to meet the needs of insurers, businesses, and the broader community.”
Richard Klipin, CEO of the National Insurance Brokers Association (NIBA), commented: “A proactive approach to disaster mitigation, focused on long-term investments at both community and household levels, will reduce the impact of natural disasters, enhance resilience, and alleviate the financial pressures that increase insurance premiums.”
