Suncorp has outlined the thinking behind its “long-held and well-documented concerns” over a proposed government-backed cyclone reinsurance pool for northern Australia.

As previously reported by insuranceNEWS.com.au, the insurance industry has agreed to help Federal Treasury explore the feasibility of a pool, which would help bring down soaring insurance premiums in northern Australia.

While the majority of the industry has resisted government intervention in the market up until now, insuranceNEWS.com.au understands IAG has joined Allianz in expressing support for a pool.

But Suncorp says a pool would be "complex, very costly to government without a clear exit strategy, blunts price signals, and has many design challenges”.

In 2015 the Northern Australia Insurance Premiums Taskforce found there is a 10-20% chance of such an arrangement costing government more than $2 billion over 10 years.

There is a 5-10% chance that it will cost more than $5 billion over the same time period.

Suncorp EGM Insurance Pricing and Products Darren O’Connell also points out that the narrow focus of the proposed pool, which would be restricted to cyclone losses, means many catastrophes would not be covered.

“A pool would not have responded to the majority of damage caused by Cyclone Oswald in 2014 which caused more than $1 billion in losses,” Mr O’Connell said.

“Nor would it have responded to the monsoonal rain event this year which is expected to total more than $1.3 billion in losses in Townsville and north Queensland.”

Despite its concerns, Suncorp has said it is willing to assist in investigations because it “wants insurance to be available and affordable for all customers, no matter where they live in Australia”.

“Given there are affordability pressures that persist and a lack of investment in resilience building and communities remaining at high risk, we will assist the Government to again look at the feasibility of a pool more closely,” Mr O’Connell said.

Meanwhile, Allianz Australia continues to promote the potential benefits of a pool.

Chief Corporate Affairs Officer Nicholas Scofield told the Sydney Morning Herald that a government-supported cyclone reinsurance facility would be the “most efficient and effective mechanism” to bring premiums down.

He says any mitigation spending is “useful”, but that it is “unlikely to comprehensively solve the problem in the short to medium and even the long term”.