Allianz has backed the creation of a natural disaster reinsurance pool, to tackle the affordability crisis facing homeowners vulnerable to extreme weather.

In its submission to the financial system inquiry, the insurer says annual premiums for customers facing high flood and cyclone risk can be more than $30,000, which is likely to be unaffordable for most Australians.

It says mitigation and adaptation are important but are unlikely to provide a “comprehensive solution” on their own.

“Allianz remains of the view that a natural disaster reinsurance pool could be used to address the lack of affordability of home insurance premiums for those Australians facing high, weather-related insurance risks,” the submission says.

“With appropriate government regulation, a natural disaster reinsurance pool could be established and operated by the insurance industry and funded by a modest levy on residential insurance policies, similar to the way the terrorism pool is funded by a modest levy on commercial property insurance policies.”

Allianz made similar submissions to the Natural Disaster Insurance Review following the 2011 Queensland floods.

The review recommended a “flood risk reinsurance facility”, but the Government did not adopt it.

Allianz GM Corporate Affairs Nicholas Scofield told insuranceNEWS.com.au the insurer prefers an industry-led solution to government-inspired initiatives.

He says the Government’s proposal of an aggregator for north Queensland is likely to force prices up, not down, because most insurers’ appetite for the market is already satisfied.

“Our main reason for putting this forward as far back as 2011 is that if really unaffordable premiums were left out there the Government would do something really stupid. The aggregator falls into that category.”

Mr Scofield says the broader insurance industry is unwilling to accept that regulatory assistance is needed to solve the problem. “We are the only ones even volunteering this for serious discussion.”

He says the industry mistrusts anything that distorts pricing, and Allianz shares this fear – unless intervention is absolutely necessary.

“It is done with compulsory third party motor insurance and terrorism. So why not here? There is a bit of hypocrisy going on. Some people want to have their cake and eat it too.”