The Australian Reinsurance Pool Corporation (ARPC), the government agency that manages Australia’s terrorism and cyclone reinsurance arrangements, has released its latest premium review, reporting continued improvements in insurance affordability and access in areas with the highest hurricane risk.
According to ARPC, average homeowners insurance premiums in areas with the highest hurricane risk have fallen 37% since the hurricane reinsurance pool was launched in October 2022.
The company also said insurance supply in these regions increased by 27% over the same period, which ARPC attributed to increased participation by insurance companies in the scheme.
ARPC chief executive Dr Christopher Wallace said the latest findings showed the pool was helping to address insurance affordability pressures on communities at risk from severe weather.
“Insurance affordability remains a significant and ongoing challenge for many Australians, particularly in areas with higher risk of natural disasters,” Dr Wallace commented.
“These results show that cyclone pools are providing real support where it is needed most by helping to lower premiums and improve insurance coverage in areas with higher cyclone risk.”
ARPC said conditions in high-risk areas have remained relatively stable over the past six months, with premiums and insurance supply generally stable despite continued pressure on domestic and international insurance markets.
Based on insurer quote data, ARPC’s assessment found that premiums fell the most in medium- and high-risk areas, which the company said reflected the expected focus of the pool. ARPC noted that in the low-risk segment, pricing changes were more closely related to broader insurance market trends than to the operation of the plan itself.
The company also reported similar results for small and medium-sized businesses, with premiums falling in high-risk categories after insurers joined. ARPC added that changes in business interruption premiums are less consistent and continue to reflect wider market impacts.
The purpose of introducing cyclone reinsurance pools is to improve insurance outcomes in cyclone-prone areas by reducing the cost of insurance in high-risk areas, while keeping premiums in lower-risk markets in line with the wider industry environment.
Dr Wallace said the review highlighted the fund’s role in wider efforts to improve insurance outcomes for disadvantaged communities.
He added: “Cyclone pools are an important part of a wider response to improve insurance outcomes for vulnerable communities.”
“It is contributing to more stable and more accessible insurance markets in high-risk areas, while government and industry work to build resilience and reduce long-term risks.”
ARPC said the latest assessment results will be used to support a future review of the scheme’s pricing structure.
