While Australia's Cyclone Reinsurance Pool (CRP) has contributed to reducing pressure on insurance premiums in Northern Australia, a greater focus on climate resilience and mitigation is still required to put sustainable downward pressure on insurance costs according to the Insurance Council of Australia (ICA).
The ICA, in its submission for the statutory review of the Terrorism and Cyclone Insurance Act 2003, said the CRP must be part of a broader solution that includes policies to actively reduce risk.
The current government review is a first for the CRP and aims to assess its effectiveness in improving insurance affordability and availability for areas facing high cyclone risk. Since its inception in 2022, the CRP has contributed to lowering premiums, with the Australian Reinsurance Pool Corporation (ARPC) estimating reductions of up to 39% for the highest-risk properties.
Insurance access has also improved, with home insurers accepting more quotes across all risk bands –the highest-risk areas saw a 27% increase in accepted quotes. Risk reduction remains a core focus for the insurance industry.
According to a media release by ICA, it supports greater alignment between the CRP and mitigation efforts, including building a shared evidence base over time that enhances accurate risk-based pricing and supports mitigation efforts.
However, the CRP does not directly reduce the underlying risk posed by extreme weather. As cyclonic events continue to intensify, greater investment in resilience and mitigation is critical to safeguard communities and deliver long-term insurance affordability.
ICA said the insurance industry remains particularly concerned about the affordability of flood cover, with 1.36m properties across Australia facing flood risk. This challenge requires a coordinated, whole-of-system approach that combines financial incentive, infrastructure investment and community engagement.
ICA Deputy CEO Kylie Macfarlane said, “Insurers are passing on savings from the CRP to policyholders, who are seeing improvements in insurance affordability and availability, particularly in areas facing the highest cyclone risk. But 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. Insurers are working with all levels of government on solutions that deliver long-term improvements to community safety and insurance affordability.”