A parliamentary inquiry into the operation and implementation of the cyclone reinsurance pool has published its final report, more than two years after it was launched.

And while the Joint Select Committee on Northern Australia kicks the can down the road on key issues such as whether to extend the pool’s 48-hour coverage period after a cyclone ends, it does make eight recommendations, which are summarised below.

The committee recommends the Australian government must proceed with the planned legislated review of the cyclone reinsurance pool in 2025.

The report says that after listening to stakeholders, “all sides agreed” the pool is beneficial. What they don’t agree on is how it can be improved.

Extending the pool’s 48-hour cut-off, expanding it to include all flood damage and lifting sums insured are just some proposals put forward.

But the committee does not form strong views on these matters, instead reiterating that they should be considered by the scheduled review of the pool later this year.

The committee recommends the Australian government publish modelling on the cost and benefits of the inclusion of marine insurance in the cyclone reinsurance pool.

Stakeholders gave “opposing views” on whether insurance for marine-related infrastructure should be included in the pool.

The committee previously called on the government to “announce a position” on the inclusion of marine.

“The committee notes there has been no response from the Australian government to date and reiterates its position. The committee further calls on the Australian government to release modelling about the inclusion of marine insurance in the pool.”

The committee strongly recommends the Australian government support an ongoing national resilience program on a permanent basis.

The report backs calls for resilience and mitigation measures because, over the long term, they “reduce underlying risk and, therefore, premium costs”.

It wants to see a “greater focus on incentivising mitigation via the pool” and evidence of insurers reducing premiums as a result of mitigation.

“The committee calls on the Insurance Council and insurers to publicly commit to providing all insurance policyholders who engage in mitigation and resilience an estimate of how much these efforts have saved or will save them on their premium costs.  

“The committee also calls on insurers to commit to publishing the overall net positive impact of mitigation and resilience measures on the cost of insurance premiums.”

The committee recommends the Australian government consider a range of measures to improve resilience and mitigation of high-risk homes in northern Australia, including: providing targeted tax offsets for eligible households; and providing direct subsidies to eligible households.

The report says funding cyclone damage mitigation via a tax offset should be considered.

“Any offset should be time-limited, restricted to existing homes in particular regions, and apply only to specific upgrades. As an alternative, the Australian government could consider providing direct subsidies to eligible households in northern Australia to engage in household resilience and mitigation.”

The committee recommends the Australian Competition and Consumer Commission, in its insurance monitoring role, investigate the impact of current taxation methods on insurance premium pricing.

The report acknowledges that most insurance premiums are subject to state and territory stamp duty of about 10%.

“As insurance premiums rise, the tax also rises, creating a doubling-up effect on consumers.”

The committee recommends the Australian government fund the ACCC to continue its insurance monitoring role until at least 2030.

The ACCC’s monitoring of the pool and its impact on premiums is “an important accountability mechanism” that should continue until at least 2030, the committee says.

“Given the pool has only just commenced fully operating, the scale of changes required to see it operate more effectively, and broader inflationary pressures leading to increases in the cost of insurance, it is more important than ever that the ACCC is funded to continue this important role.”

The committee recommends the Australian government fund and expand the remit of the ACCC to examine the extent to which insurers are reducing premiums in response to mitigation and resilience measures.

Such an expanded role is “crucial”, the report says, in light of increased spending by governments on mitigation and resilience. 

“If governments are to spend (or are already spending) this much money on mitigation and resilience, certainty should be provided that taxpayers’ money is achieving the intended effects by improving insurance affordability.”

The committee recommends the Australian government publish the report of the 2025 scheduled review into the Terrorism and Cyclone Insurance Act 2003 once the report is finalised.

“Given the committee’s recommendations that the scheduled review consider many of the issues raised in evidence to this inquiry, the committee calls on the Australian government to commit to publicly releasing the report of the upcoming review.

“This would provide certainty to insurers, policyholders and committee members that the review has given serious consideration to these issues before forming a view on the future of the cyclone reinsurance pool.”