Disappointment from ACIL Over Cyclone Pool Rates: Calls for Major Overhaul

The Australian Consumers Insurance Lobby (ACIL) has expressed its disappointment following the Australian Reinsurance Pool Corporation’s (ARPC) announcement (click here) of the premium rates for the Cyclone Reinsurance Pool, set to take effect from April 1, 2025. ACIL argues that, despite the announcement, no significant changes have been made to address the ongoing discrepancies in insurance costs for Northern Australia.

“There remain unacceptably high gaps between home insurance and strata premiums north of the Tropic of Capricorn and the rest of the country. This disparity unfairly burdens Northern Australian residents,” said ACIL Chairperson, Mr. Tyrone Shandiman.

While ACIL acknowledges that ARPC is bound by the Treasury Department’s structure for the pool, ACIL are urging a comprehensive review, noting structural deficiencies in the current arrangement.

"One of the biggest anomalies, which disappointingly remains unaddressed in the recent rate review, is the fact that policy holders south of coastal Port Macquarie, including Sydney, contribute nothing towards the Cyclone Pool, leaving Northern Australians to subsidise these areas. This is despite historical data showing that cyclones have impacted Sydney in the past," Mr. Shandiman added.

Research shows that cyclones impacted New South Wales, including Sydney approximately every two years between the 1940s and early 1970s, with a total of sixteen cyclones recorded in New South Wales during that period. These cyclones were linked to the Interdecadal Pacific Oscillation (IPO), not global warming, and recent research indicates that similar IPO conditions have returned.

In addition, warmer water temperatures measured off Sydney in autumn 2024, driven south by the East Australian Current, suggest the layered potential for future cyclones along the New South Wales coast. “Despite these risks, Sydney and areas south of Port Macquarie are effectively exempt from contributing to the pool, creating an inequitable distribution of risk and financial burden,” Mr. Shandiman said.

ACIL believes that the Cyclone Reinsurance Pool is essential for addressing affordability and availability of insurance, particularly in high-risk areas. However, without structural changes in the 2025 review, the pool will fail to meet its objectives of adequately reducing insurance premiums for Northern Australia.

“The pool needs to ensure that high-risk areas are not forced to subsidise free cover for areas with a history of cyclone activity or emerging risks,” Mr. Shandiman said. “We are calling on the government to reconsider the current structure and to adopt a more equitable spread of risk, so that all Australians share the burden fairly.”

“The government must ask itself if the status quo is acceptable. ACIL believes it is not,” Mr. Shandiman concluded. “The upcoming 2025 triennial review is an opportunity to bring fairness to the Cyclone Pool.”