Allianz has told a Senate inquiry into the impact of climate risk on premiums that a flood reinsurance pool is the best way to make flood cover affordable for the highest-risk households.

The insurer’s submission to the inquiry notes Lloyd’s and Swiss Re recently stated the changing climate is not yet adding to the cost of natural catastrophe claims. Losses have increased, but this is – so far – mainly due to demographic movement and rising asset values.

“While insurance premiums reflect historical claims experience, and will be impacted by past natural catastrophe events, at present, it hasn’t generally been possible to identify that climate change is directly contributing to weather-related natural catastrophe losses,” the submission says.

Allianz says its householder premiums have risen 10%, 17% and 15% in the past three years, and those facing high flood risk have seen bigger rises.

It says that in NSW, the most exposed households could be paying $45,000 a year (after taxes) just for flood cover on home and contents (with sums insured of $500,000 for building and $100,000 for contents).

The submission warns non-insurance rates for flood are growing.

“For Allianz’s householder portfolio, 74% of customers with the highest flood rating do not purchase flood cover. For some highly exposed communities, such as northern NSW, which has been regularly impacted by extensive flooding events, most recently in 2022, about 90% of customers do not purchase flood cover.

“Allianz is deeply concerned for customers who cannot afford flood cover because what is likely to be their largest and most prized asset is not insured against the peril to which they are most vulnerable.

“It is for this reason that Allianz has advocated for the establishment of a government-backed flood reinsurance pool since 2011.”

Allianz says mitigation, adaptation, land use planning, development controls and robust building standards “are all critical” in tackling the affordability challenge.

It says state government buyback schemes are also “very welcome”, but high costs mean “this form of assistance is unlikely to be a comprehensive solution for most households in the short to medium term”.

It adds: “For households where flood risk cannot be materially mitigated, Allianz is of the view that affordable home insurance for households with high flood risks can only be delivered through some form of industry-government partnership.

“In Allianz’s view, this would best take the form of a national flood reinsurance facility underpinned by Commonwealth legislation, for example, a government-backed flood reinsurance pool based on similar principles to the cyclone reinsurance pool.”

As insuranceNEWS.com.au has reported, Insurance Council of Australia members are discussing possible partnership measures.

The federal government has also launched its Insurance Affordability and Natural Hazards Risk Reduction Taskforce, which will consider mitigation and “other near-term solutions” to improve affordability.

Submissions to the Senate inquiry can be read here.