A Parliamentary Committee report into the Cyclone Reinsurance Pool has expressed “serious concerns” about its implementation and has made recommendations designed to improve the scheme roll-out over the next few years.

The committee stopped short of proposing a significant overhaul, with the scheme to be further monitored as it takes effect more widely, and with a legislated review due in 2025.

“In this instance, the policy is not yet meeting its policy objectives because it is not fully implemented - most insurers are yet to join the pool,” the report says. “Whether the design of the pool is faulty, which would necessitate policy changes, cannot yet be determined based on the available evidence.”

The committee says the Cyclone Reinsurance Pool isn’t a “one-shot” solution but its optimal operation is vital to ensuring insurance affordability in Northern Australia, and by extension, continued liveability and growth across the region.

The pool was referred to the Joint Select Committee on Northern Australia for inquiry last October amid concerns over the slow roll-out of the scheme and doubts over its potential to deliver meaningful premium savings in cyclone-prone areas.

The committee heard that delays were caused by the timing of information released by the Australian Reinsurance Pool Corporation, which is operating the scheme, and because insurers had existing reinsurance arrangements.

The recommendations include ensuring that future modelling is provided well in advance of key dates. It also says the Government should make clear its position on whether marine insurance will now be added and future reviews should consider the sum insured limit for business properties.

It proposes that the Government review the availability and coverage of insurance in Northern Australia, specifically the insured versus the uninsured, including non-participation.

The report recommends the 2025 review consider whether cover should extend beyond 48 hours after a cyclone ends, while noting the option for earlier change if required.

“The committee recommends that the Federal Government maintain a watching brief on the impact of the 48-hour clause on insurance in Northern Australia, particularly as new cyclones arise, and adjust this clause if deemed necessary,” it says.

A wider role is proposed by the Australian Competition and Consumer Commission (ACCC), which is tasked with monitoring prices. The ACCC should in addition look at the state of the cyclone insurance market and report on instances where “thin markets" may be impacting coverage and cost, it says.

The 2025 review should also look at whether the pool’s cover should “sunset” for new builds past a certain date so it’s not subsiding future poor building decisions.

The report recommends the Government facilitate a coordinated approach to land use planning building codes, mitigation and disaster resilience that includes the National Emergency Management Agency and other levels of government.

The Cyclone Reinsurance Pool scheme started in July last year after it was announced in 2021 by the previous Morrison Government, but only two insurers have joined to date. Larger insurers have until the end of December this year to participate and smaller insurers until the end of 2024.

“The committee considers it unfortunate that in the previous Parliament, the Government raised expectations above what the pool could reasonably be expected to deliver in terms of the scale and timeframe of premium reductions,” the report says. “There is an important lesson here for government about managing community expectations during the roll-out of a scheme.”

The committee says it intends to again consider the operation and implementation of the pool next year, once major insurers have joined, and small insurers have begun the work to transition their reinsurance programs over.