The Insurance Council of Australia (ICA) has rejected a proposal from a group of Queensland councils that would establish a not-for-profit mutual fund to provide insurance for local residents. ICA CEO Andrew Hall (main picture) said solutions to nat cat challenges must bring down the underlying risk. “Whether it's via the private sector, through insurance companies that are publicly listed or privately owned; or through a mutual, the key factor remains that unless the underlying risk is brought down, there is still a lot of cost in that system,” said Hall on ABC Radio National today.
Hall was responding to a push by a group of south-west Queensland councils to explore underwriting a mutual-style insurance vehicle, amid mounting community anger about flood-driven premium spikes in some of the hardest-hit catchments. He said he understood the “frustration” being voiced by local leaders, but warned that any insurance model—mutual or otherwise—still has to fund potentially catastrophic claims, and that becomes extremely difficult without deep, diversified capital and meaningful risk reduction.
Hall noted mutuals are not unusual in insurance, and some of the world’s largest insurers began as mutuals. But he questioned whether a small, localised pool could sustainably carry repeated flood losses without spreading risk far more broadly.
For brokers and insurers, the core issue is structural: flood premiums in high-risk areas are being driven by the probability and severity of inundation, and that pricing reality doesn’t disappear simply because a different entity is writing the policy.
The danger, Hall argued, is that a narrow risk pool could be “very heavily financially exposed” if a major event hits—particularly in a region where multiple properties may be impacted at the same time. In practical terms, that raises questions about reinsurance costs, governance, claims-paying capacity, and what happens to policyholders if the mutual can’t meet its obligations after a severe season.
Rather than local governments attempting to build a mutual from scratch, Hall said the industry wants to work with councils—and state and federal governments—on measures that actually reduce flood risk and, in turn, premiums.
He pointed to Australia’s lack of a formal mechanism to pool flood risk compared to many other developed insurance markets, arguing the solution should be a public-private partnership (PPP) approach. That would involve coordinated action across all levels of government, aligned with the insurance industry’s pricing and risk modelling.
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Hall said insurers have provided peril data to the federal government through the Hazards Insurance Partnership, enabling clearer identification of the highest-risk zones and supporting long-term mitigation planning. He also highlighted the ICA’s proposal for a $30 billion flood defence fund over 10 years, framing it as the kind of large-scale resilience investment required to shift the dial on affordability.
From a distribution and underwriting perspective, that blend—risk reduction infrastructure plus a broader pooling mechanism—would be designed to relieve pressure on premiums in the most exposed communities, while keeping coverage available through the established market rather than fragmenting capacity into small, local pools.
Hall also addressed why premiums are rising so sharply beyond pure hazard exposure, pointing to construction inflation—especially outside capital cities.
He said rebuilding costs have increased about 40%, and often more in regional areas, creating a mismatch between property values and insured replacement costs. In some towns, he said, homes worth $200,000 to $300,000 may cost $600,000 to $800,000 to rebuild—an economics problem that feeds directly into sums insured and premiums.
He also argued some existing mitigation infrastructure is no longer calibrated to today’s risk profile. Using Charleville as an example, he said a levy designed for a one-in-80-year flood may not adequately address larger events that data suggests remain plausible, meaning insurers are still pricing for the residual risk of severe flooding even where nuisance floods are better managed.
For brokers advising clients in flood-prone regions, the message is that affordability relief will likely depend on both better mitigation and broader-based risk sharing—rather than a local mutual that may struggle to diversify exposure or absorb losses when the “worst happens.”
Samantha O’Toole, chair of the South West Queensland Regional Organisation of Councils (SWQROC) chair said the local governments took the step after mitigation work and about five years of discussions with insurers failed to bring affordable cover for residents.
