Cyclone pool premium rates are being finalised by the Australian Reinsurance Pool Corporation (ARPC) in consultation with insurers, with highest savings targeted at those most at risk, a Treasury official has told a Senate committee inquiry into the legislation.

Financial Systems Division Assistant Secretary Mohita Zaheed was asked about the number of people who would receive the highest level of savings promised by the Federal Government, any impacts from cross-subsidisation and whether some policyholders could end up paying more.

“What the modelling indicates is that households would see a reduction of up to 46%,” she said. “You would not expect every household in northern Australia to get a 46% reduction, but those at the highest risk categories would be receiving a premium reduction up to 46%.”

The pool will target savings to high and medium-risk households, with the intention that reinsurance costs for low-risk households would not go up. Pricing processes underway through the ARPC provide an opportunity to “address any material concerns if they arise”, she told the committee.

“It is not built-in that people down south with low risk of cyclones are facing higher premiums to subsidise the pool,” she said.

Ms Zaheed said ARPC work on designing the premium structure and setting rates is on track for the scheme to commence from July 1.

The Federal Government has said northern Australian households could see premium savings of up to 46%, strata developments up to 58% and SMEs up to 34%, but has declined to release the modelling.

Ms Zaheed says the process has involved accessing confidential insurer data and global data sets, while Treasury has worked with the Australian Actuary, consultants Finity and has canvassed a range of stakeholders. Similar pool-type overseas arrangements were also examined.

“The government has made its public interest immunity claim in relation to the modelling so I am not able to share more of the modelling detail,” she said.

Financial Services Minister Jane Hume told a Senate committee estimates hearing last month that the modelling had been the subject of cabinet deliberations, which are not revealed, and information has been provided to Treasury on the basis of commercial confidentiality.

“To disclose such material would undermine the ability of the Treasurer as well as other government agencies to obtain the benefit of such services in the future as well as provide advice to government,” she said.

Ms Zaheed, was also asked yesterday about the decision to end cover 48-hours after a cyclone is downgraded, with Sure and RACQ noting that many cyclone-related claims will fall outside the pool, based on past events.

Sure said earlier yesterday that on its modelling it believes around 30% of total cyclone risk will still be covered directly by insurers and not by the pool.

Treasury had received feedback and had looked at the 48-hour clause carefully, while seeking to strike an appropriate balance, Ms Zaheed said.

“There is a range of industry practices,” she said. “One of the things that we heard from different stakeholders was that it was important the pool had a very clear demarcation in terms of what was covered and what was not covered.”