Australia has finally shaken off its mitigation inertia as the Albanese Government prepares to disburse $200 million to more than 180 projects that qualified for the first round of funding under its five-year $1 billion Disaster Ready Fund (DRF). 

The DRF initiative starts on July 1, replacing the Emergency Response Fund, and it commits the Government to spending a maximum $200 million a year on disaster prevention and resilience works. 

States and territories will match the Commonwealth, meaning the country is set to potentially invest up to $2 billion over the next five years on flood levees, sea walls, cyclone shelters and an array of other mitigation programs that will improve the country’s disaster readiness. 

Insurers and industry analysts, who have long urged Canberra to invest up to $200 million a year on mitigation spending, as flagged in a 2014 Productivity Commission report, say the first round of confirmed 187 DRF projects marks a new start for the country. 

The Insurance Council of Australia (ICA) says the DRF is an “important milestone” towards building stronger community resilience to extreme weather and will have an impact on premium pricing and reducing the protection gap. 

“For many years the insurance industry has focused its advocacy on government investment to improve community resilience to worsening extreme weather, and [now] we are seeing this hard work pay off for Australian communities,” ICA CEO Andrew Hall said. 

“The cost of worsening extreme weather is impacting the affordability and availability of insurance in some parts of Australia, and we know a key lever to improving insurance outcomes is reducing or mitigating the risk that is present.” 

Looking beyond the five-year DRF scheme, Mr Hall urged Canberra to take a longer-term view.  

“We need to see this same level of funding for at least the next 10 years to ensure that Australians receive the full benefits of resilience and mitigation investment, including stabilising insurance premiums in areas at high risk of extreme weather,” Mr Hall said. 

Industry analysts say last year’s catastrophic floods and the 2019/20 Black Summer bushfires played a decisive role in changing the national conversation around mitigation. 

For many years the country allocated just 3% of disaster funding on prevention. The other 97% went to repairs. It was an imbalance that insurers and risk mitigation experts have long argued needs to be reversed. 

“Everyone has been lobbying hard for this. It’s a massive step in the right direction,” KPMG Insurance Partner Scott Guse told insuranceNEWS.com.au. 

“The frequency and intensity of catastrophic events was certainly a catalyst. And then everyone’s jumped on the bandwagon to push the agenda harder.” 

Minister for Emergency Management Murray Watt says close to 70% of Australians were impacted by storms, floods, cyclones and bushfires in 2022 alone, signalling the urgent need to take decisive action. 

“As we continue to fund disaster recovery and specific resilience programs in areas which have suffered disasters recently, it’s critical we do more to build defences right across Australia, to better protect communities and their regional economies,” he said. 

“We know that every dollar spent on disaster resilience and mitigation delivers a return on investment to governments and households nine times over. But as a country we invest far more in recovering from disasters than we do defending against them, and that mentality has got to change.” 

The National Emergency Management Agency (NEMA), which oversees the DRF scheme, says for every dollar spent on disaster risk reduction, there is an estimated $9.60 return on investment. 

Insurers, in pushing for increased mitigation spending, have long pointed out such investment will benefit consumers in the form of lower premiums. This has become even more critical after the floods last year and other catastrophes led to sharp rises in premiums. 

“Investing in resilience and mitigation for local communities from extreme weather is a no brainer,” Suncorp Group CEO Steve Johnston said. 

“If you reduce the risk, you reduce the impact these disaster events have on local communities, and you can put downward pressure on insurance premiums.” 

Now that the Government has answered the mitigation call, insurers will no doubt have to live up to the premium promise. 

“I expect insurers to walk the talk,” Mr Guse said. “They have very intensive risk-focused models for pricing and if the evidence stacks up, I would expect the insurers to pass through the benefits.”