A Senate committee inquiry into last summer’s bushfires has recommended the release of mitigation funding and that the Australian Competition and Consumer Commission (ACCC) monitors premiums due to concerns over future price increases driven by rising natural disaster risks.

An interim report released in the Senate last night also calls for the Australian Prudential Regulation Authority (APRA) to step up its actions regarding insurance and climate change.

“We are concerned by the effect of the increasing frequency and severity of climate change-driven natural disasters on the financial stability of the insurance industry and the apparent preparedness of the industry to make policyholders carry the burden through increased premiums,” Labor Senator and Committee Chairman Tim Ayres said.

“For that reason, we have made recommendations relating to APRA supervision of the industry and monitoring of the natural perils component of the insurance premiums by the ACCC.”

The report calls for the release of money for mitigation projects from the Emergency Response Fund, as a priority, but also says the industry’s focus on mitigation and removal of taxes on insurance should be accompanied by a stronger stance on climate change.

Policyholders should not carry the entire burden of premium increases, given insurers are “calling on taxpayers to make significant mitigation expenditures and forgo significant tax revenues, while the industry itself is not prepared to publicly engage with the strongest possible mitigation measure available - rapid emissions reductions and decarbonisation”, the report says.

The report calls for the ACCC to monitor prices, costs and profits relating to insurance premiums, with particular attention on the impact of climate change-driven severe weather on the natural perils component of premiums.

APRA should recommence work on a climate-change related prudential practice and governance guide for the industry, after a suspension due to the COVID-19 pandemic.

The regulator should also, if it has not already done so, undertake financial stress testing in anticipation of worst-case scenario severe weather events causing catastrophic insurance losses, “either singly or in combination”.

The interim document titled “Lessons to be learned in relation to the Australian bushfire season 2019/20” was released with a dissenting report by two Liberal Party members and additional comment from Greens Senator Janet Rice and Malcolm Roberts, a Senator with Pauline Hanson’s One Nation.

Liberal Senators recommend state and territory governments that rely on insurance levies for emergency services funding should look for alternative arrangements and say APRA should continue to focus on COVID-19 priorities.

The Greens call on Parliament to declare a climate emergency, while Senator Roberts says “the politicisation of bushfires” has detracted from the inquiry and tainted recommendations.

The committee commended the industry for settling claims from last season’s bushfires with speed, efficiency and compassion.

The report notes there has been no evidence to suggest claims handling processes or the conduct of insurers “and the associated support they have provided to bushfire-affected communities has been anything other than exemplary”.

The report is available here.