The Federal Government’s cyclone reinsurance pool for northern Australia could deliver significant premium reductions without leaving taxpayers with a hefty bill, a climate expert says.

As previously reported by insuranceNEWS.com.au, Treasury is consulting on the design of the scheme, which is set to launch next July and will be backed by a $10 billion Government guarantee.

Treasury wants the scheme to be “cost-neutral”, delivering savings to insurers and therefore customers by foregoing a commercial profit margin.

Some within the insurance industry have suggested the level of premium savings that will ultimately be delivered will be disappointing, but Finity Principal Rade Musulin told insuranceNEWS.com.au that he “wouldn’t jump to that conclusion”.

“Obviously the final form of the pool will be the key factor,” he said.

“But this is something that has been studied for a long time and the Government understands this issue very well.

“They are lucky that they have the Australian Reinsurance Pool Corporation to provide existing infrastructure. There are other cases where pools have been set up without having that expertise available.”

The Government has talked about reducing premiums by more than $1.5 billion over 10 years, and Mr Musulin says “that’s an achievable number, but we have to see the details to understand the maths”.

“It’s certainly possible to design pools that break even. The Florida hurricane fund was able to break even over long periods of time.

“There are examples of this all over the world, but there are other examples where pools have lost money.”

Critics have also argued that it isn’t fair to limit assistance to those affected by cyclones in the north, when many other Australians are suffering from high premiums.

“The insurance affordability problem has been most acute for the longest period of time in northern Australia,” Mr Musulin says.

“Is it the only problem? No. But it’s the problem that the Government has chosen to tackle first.”