Strata groups have sought answers from insurers over the lack of cover availability in parts of the northern Australian market despite the participation of underwriters in the Cyclone Reinsurance Pool. 

The Australian Consumers Insurance Lobby (ACIL), Unit Owners Association of Queensland (UOAQ), Owners Corporation Network of Australia and NQ Strata Action Group say they have collectively issued a formal request to the Insurance Council of Australia (ICA) seeking an explanation.

The groups say strata insurers such as Chubb, IAG-underwritten SUU and Allianz-underwritten Strata Community Insurance have “continued to withhold quotes for new policies” in the northern region, resulting in a coverage shortage, particularly for properties valued at over $5 million, and more severely impacting those over $20 million.

The availability problem has persisted, even as some buildings have benefited from reduced premiums following the introduction of the federal government-backed scheme.

“In several instances, we've noticed significant premium reductions, in some instances 50%, for insurance renewals on large strata buildings insured through the pool,” ACIL Chair Tyrone Shandiman said.

“This indicates that the Cyclone Reinsurance Pool is successfully reducing premiums for such buildings. However, the reluctance of insurers to provide quotes for new policies, despite having access to this pool, remains a point of confusion for consumers.”

The groups say certain property categories, including older constructions and buildings with architectural features such as tile roofs, are facing significant challenges in obtaining insurance despite being eligible under the pool.

“As a committee member of a body corporate in the Whitsundays, we find ourselves with no other option than to secure insurance from an international provider with premiums that are tenfold higher than those typically seen in southeast Queensland,” UOAQ Treasurer Bob Boundy said.

“Despite the introduction of the Cyclone Reinsurance Pool, which we hoped would broaden our choices and reduce costs, the anticipated benefits have yet to be realised.”

Large insurers were required to join the Cyclone Reinsurance Pool by the end of last year, while smaller insurers have an additional 12 months.

Mr Shandiman says the pool's introduction has “changed the landscape of reinsurance limitations” and the groups want to understand why insurers are still hesitant to offer cover in the new environment.

ICA says the pool’s design is focused on pricing, rather than risk reduction, and underwriting appetites may not have materially shifted due to a number of factors, including flood risks and poor building standards and maintenance.

It’s also not possible to compare prices between northern and southern Australia “because they are fundamentally different risks which are priced differently”, it says.

“ICA and members have met with ACIL and other consumer groups focused on insurance consumer issues in northern Australia several times to discuss this and other matters,” a spokesperson says. “We will continue to engage on these issues as we work to ensure good outcomes for consumers across Australia.”

Allianz says the risk acceptance criteria of insurers are unlikely to change solely because of participation in the pool, which is not designed to address underlying risk quality.

“The pool does not convert a poor-quality risk into a good risk,” a spokesman told insuranceNEWS.com.au. “It does not address broader construction quality concerns in the region, the lack of risk mitigation for flood, or cover for flood unrelated to a cyclone or which occurs after the pool post-cyclone downgrade 48-hour period.”

Allianz says the pool doesn’t protect insurers from tropical lows, rain events or other non-cyclonic windstorms, for which reinsurance still has to be bought at market rates, and given compulsory participation of large insurers is only a month old, any objective assessment is “somewhat premature”.