Insurers are awaiting further details on the implementation of the northern Australia cyclone reinsurance pool after the Federal Government yesterday said finalised legislation is set to be introduced into Parliament and would deliver significant premium savings.

Suncorp CEO Steve Johnston said today that once the legislation is passed, there remain practicalities to be considered around how it will work in practice and what it will mean for reinsurance rates.

“The way it is actually implemented is going to be where the rubber really does hit the road,” he told insuranceNEWS.com.au.

Mr Johnston says insurers will still face material hazard costs in northern Australia from weather events, such as low pressure and monsoonal systems that aren’t cyclones but which can still cause extensive flood damage.

“There is still a residual risk profile in northern Australia that will continue to be borne by the primary insurers and just how this plays out through the pool arrangement, reinsurance rates, that is where the devil will be in the detail,” he said.

Mr Johnston said the Government had consulted broadly and the company had been involved in the expert panel, which has provided input in developing a pool solution for the affordability issues in northern Australian

“It is a challenging problem to solve and we will go into the introduction of it in good faith,” he said. “We recognise the issue and we would like to be part of the solution.”

Assistant Treasurer Michael Sukkar said on ABC North Queensland radio yesterday that once the pool commences he would expect to see a spate of announcements from insurers who are either increasing their footprint in north Queensland or entering the market for the first time.

“The reinsurance pool, by increasing competition, will mean people have genuine choices and a genuine ability to chase down the best deal, which is ultimately part of, not the entire story, but part of why we are expecting, as I said, 46% reductions for homeowners, 58% for strata property owners, 34% reductions for small and medium businesses.”

RACQ CEO David Carter said today the insurer had raised a number of questions in its submission last year about the pricing arrangements and the definitions of captured events.

“No pricing information was currently available for RACQ to validate the expected premium reductions that have been reported ahead of the introduction of the legislation to Parliament,” he said.

“Until we have that information, we are unable to comment on the figures and reductions being quoted and we look forward to continuing to work with the Government and Treasury.”

Mr Carter said RACQ will examine the legislation to see whether the Government has addressed other issues such as the pool’s limited cover of cyclone damage.

The reinsurance pool, which has a $10 billion government guarantee, will be administered by the Australian Reinsurance Pool Corporation from July 1.

“Our research and data tell us that we’re going to see more intense extreme weather events, particularly in northern Australia, and the cyclone reinsurance pool will play an important role in helping to prepare and protect people and communities,” IAG CEO Nick Hawkins said.

“IAG will continue to work with the Federal Government and insurance industry on the implementation of the reinsurance pool, and we look forward to seeing the benefits for communities across northern Australia.”