Australian Reinsurance Pool Corporation (ARPC) is in the process of reviewing the current Cyclone Reinsurance Pool premium rates and is considering minor changes that would be applicable from 1 April 2025.
As part of this review, ARPC is inviting feedback on the current and proposed cyclone pool premium rates.
In a statement, ARPC says that the main change being considered is the introduction of mitigation discounts on Wind premium rates for eligible strata policies to improve incentives to reduce and mitigate risk through reduced reinsurance premiums.
Purpose of the 2024 premium rate review
The purpose of the 2024 premium rate review is to ensure that cyclone pool premium rates continue to meet the legislative objectives as set out in the Terrorism and Cyclone Insurance Act 2003 (TCI Act):
-
To ensure that, over the longer term, premiums are sufficient to cover or offset claims and expenses including any payments made under the Commonwealth guarantee.
-
In medium to high cyclone risk areas, to keep the premiums as low as possible while maintaining incentives to reduce and mitigate risk.
-
In lower cyclone risk areas, to keep premiums at levels comparable to what would be charged by other reinsurers.
Proposed changes to existing premium rates:
The analysis in progress supports that the premium rates (as set in 2022) continue to meet the above objectives. As a result, the 2024 changes to cyclone premium rates being considered are generally minor.
Proposed introduction of Strata mitigation discounts:
ARPC is considering introducing mitigation discounts on Wind premium rates for eligible strata policies. The discount incentivises mitigation actions against structural damage from high wind loads and losses from water ingress caused by wind-driven rain. The proposed discounts have been developed through a research partnership with James Cook University – Cyclone Testing Station and reflect the estimated risk reduction of the mitigation activities. Discounts will be reviewed over time as claims data becomes available.
Following the consultation period, ARPC intends to release the new premium rates, when an updated Premium Rate Assessment Report will also be published.
ARPC is a public financial corporation established under the TCI Act. It operates a terrorism reinsurance pool that provides insurance cover for eligible terrorism losses and a cyclone reinsurance pool that provides insurance cover for cyclone and cyclone-related flood damage to houses, small businesses, and strata.
For a detailed description of the proposed changes to existing premium rates, see the consultation document