Insurers have welcomed funding for disaster resilience in the latest federal budget but say much more needs to be done soon to cut risk and protect communities as claims costs from last year reach almost $7 billion.

Treasurer Jim Chalmers last night handed down his second national budget since the Labor government was elected a year ago.

Confirmation of a $200 million investment to help communities strengthen preparedness for more frequent and severe natural disasters was welcomed by the Insurance Council of Australia (ICA), Actuaries Institute and National Insurance Brokers Association (NIBA).

The government had already committed to spending $200 million a year for five years, matched by states and territories, but ICA wants it to be extended to a 10-year rolling program.

Also commended was $46.5 million allocated over the next four years to bolster cyber security, and a commitment to legislation to simplify the tax reporting process and reduce compliance costs for general insurers.

"It is welcoming to see the Government continue its commitment to fund disaster resilience and measures to protect Australian communities from extreme weather,” ICA CEO Andrew Hall said.

Reducing physical risks to homes and communities is “critical for taking pressure off insurance costs,” Mr Hall says.

“The ICA is steadfast in its advocacy to see significant and ongoing investment in measures to reduce risk, protect communities and ultimately reduce insurance premiums for households and businesses … to see a more resilient Australia.”

In 2023/24, the Government will provide $200 million through the Disaster Ready Fund (DRF) to support projects like levee upgrades, seawalls and bushfire risk reduction projects. More than $236 million has also been set aside over the next 10 years to address risks in Australia’s flood gauge network and access to reliable flood warnings.

A new cell broadcast National Messaging System will be rolled out to enhance how emergency messages are delivered, and $8.6 million will be invested to generate a National Emergency Management Stockpile for rapid access to critical disaster resources. 

The ICA says it looks forward to developing policies to address land use planning, building codes, risk mitigation, data investment, cyber security and regulatory reform as it works with the Government on the Hazards Insurance Partnership (HIP) and a natural hazard risk database for Australia.

The Actuaries Institute said the Budget struck a good balance and developing a comprehensive Sustainable Finance Strategy was positive.

“Clean energy measures, sustainable finance and disaster resilience and adaptation are all needed to manage the energy transition and impact of climate change,” Actuaries Institute CEO Elayne Grace said. "We welcome the growing policy certainty in this space.”

BDO Tax Partner Ali Bolbol says the tax law amendment is “a welcome relief for the general insurance industry.” A misalignment between the tax law and new accounting standard for general insurers has caused anxiety and concern to the insurance industry since 2019, he says, when IFRS 17 was endorsed. 

“The proposed changes to the tax law will enable general insurers to continue using audited financial reporting information that is calculated in accordance with the new standard as the basis for their tax calculations and tax returns. This should help to streamline the tax reporting process for insurers and reduce the compliance burden they face,” Mr Bolbol said.

"The market will be able to better understand the financial position of an insurance company without having regard to certain tax timing differences.”

NIBA CEO Philip Kewin welcomed recognition that reducing the regulatory burden on insurers may help alleviate rising insurance premiums.