The Government plans to set up a reinsurance pool for cyclone and flood-related damage. It’s a positive step toward faster recovery and lower premiums.
Businesses of all sizes are on the long road to recovery following Queensland’s intense February rainfall. However, the ongoing impact on business operations and the supply chain extends beyond those directly affected.
So, while we support the reinsurance pool, we hope it includes more businesses across Australia.
What is the reinsurance pool?
The reinsurance pool is a pot of money to help cover the cost of a cyclone and flood-related damage to homes and businesses located in Northern Australia. It includes wind, rain, rainwater, rainwater run-off, storm surge and riverine flood damage caused during, and up to 48 hours after, a cyclone weather event.
Importantly, it seeks to make the cost of renewing home and business insurance premiums for cyclone and flood-affected areas affordable for more home and business owners.
To explain, insurers can confidently finance claims thanks to the Government and insurer funded pot of money. So, a small business owner with medium to high cyclone risk can gain some relief on the insurance premium price rise after a claim for cyclone or related flood damage.
The reinsurance pool will have an annual $10 billion Commonwealth guarantee. Over ten years, it expects to reduce insurance premiums by up to $2.9 billion across the eligible household, strata, and small business policies.
So, what does the reinsurance pool mean for you?
The Government expects over 880,000 eligible residential, strata, and small business property insurance policies in northern Australia will benefit from the reinsurance fund.
It’s welcome news for business owners struggling with the high costs of insurance premiums and brings financial relief for our underwriter and insurer networks.
With an active reinsurance pool to reduce premium costs for medium to high-risk cyclone exposure, we expect insurer appetite to increase. Thus, helping more business owners protect their business and livelihood.
What types of policies and property types will it cover?
The pool will cover household, residential strata and small business property policies, including:
- residential home and contents, including landlord insurance and residential farm cover
- commercial property policies with less than $5 million total sums insured across risks covered by the pool. For example, property, contents, and business interruption; and
- residential strata. Including mixed-use strata schemes, where 80 per cent or more of floor space is used mainly for residential purposes.
The Government has said that the reinsurance pool will include coverage for small business marine property insurance policies from 1 July 2023.
General insurers with eligible policies have to participate. Further, those insurers pay reinsurance premiums into the pool that reflect the expected insurance claims and the pool’s operating costs.
Such plans highlight how critical it is for you to give the correct information to insurers. Crucially, when you provide insurers with details of all business activities and likely claims, insurers can accurately underwrite the risk.
It is worth noting that the Government’s proposal includes incentives to encourage risk reduction. Specifically, discounts for properties that take steps to mitigate cyclone damage.
What can you do to prepare?
Book a risk discovery review with a Clear Adviser. We will help you understand the risks for your business and location. We’ll guide you through the options to reduce risk and help secure the most appropriate insurance program for your business.
With Clear Insurance’s fee-for-service approach, you can feel confident that all advice is in your best business interests and not swayed by insurer commissions.
Contact us today to learn more about our fee-for-service approach to risk and insurance advice.