Devastating unpredictable following impacts from events such as Cyclone Debbie must be considered in the design of the Federal Government’s proposed reinsurance pool, an economic development group says.

The Greater Whitsunday Alliance says ex-tropical Cyclone Debbie continued to cause significant destruction in 2017 once it was downgraded, with high winds and flooding continuing over the following week as the system travelled down Australia’s eastern coast.

In 1990 Cyclone Joy, which made landfall in Townsville, spawned a tornado in the Mackay suburb of Slade Point which damaged 40 homes and dumped torrential rainfall across the region.

“Any definition needs to ensure that insurance claims pertaining to the unpredictable aftermath of tropical cyclones are covered by the terms of the insurance policy in relation to cyclones,” it says in a Treasury submission.

Design details for the proposed cyclone-risk pool, backed by a $10 billion government guarantee, are currently being hammered out.

Treasury last month released a consultation paper which raised questions including how cyclone and cyclone-related flooding should be defined and also how small business should be definition for the purposes of eligibility.

The Greater Whitsunday Alliance endorses the Australian Small Business and Family Enterprise recommendation of a business with less than $10 million in turnover and fewer than 100 employees.

“It is important that the definition of small business remains as broad as possible to ensure that those businesses who act as critical economic contributors to our region are able to access adequate and affordable insurance and that new businesses are able to enter into the regional economy,” it says.

The alliance proposes the pass-through of resinsurance premium savings to policyholders should be monitored under a model similar to the Payment Times Reporting Scheme that was introduced by the Federal Government at the start of this year.

That scheme requires large businesses to delivery data to the regulator via six monthly reporting and aims to improve payment outcomes for small firms by creating greater transparency around payment practices.

“Similar accountabilities should be required of insurance companies accessing the reinsurance pool,” it says.

The group supports risk mitigation incentives as part of the reinsurance pool design, along with measures to improve transparency around passed on benefits of mitigation, but cautions against exclusions for new buildings centred on time-based cut offs or location.

“Much of the core business and residential areas within Mackay and the Whitsundays exist on land at risk of damage from cyclones and cyclone related flood inundation,” it says.

“To place restrictions on the new builds would potentially impact on capacity and appetite for new residential properties and businesses to be established across the region.”

Regional councils of the impacted areas “have many motivations to mitigate risks for new builds that extend well beyond the focus of insurance affordability and accessibility” and council processes should be sufficient without additional interventions within the design of the pool, it says.