Australia has more insured properties exposed to flood than Britain despite its smaller population, Munich Re Australia MD Scott Hawkins has told the parliamentary inquiry into the industry’s response to the 2022 catastrophes. 

“We actually have a greater number of properties exposed to those perils, and also where we have built in the past, and continue to build, are areas that are often quite exposed to flood,” he said. 

Mr Hawkins says flooding is a problem in many countries and various approaches are taken towards insurance, but reducing risk is critical and pricing signals should be maintained. 

“Even if I think of Germany, where my employer is based, flood is a problem there, and the level of flood coverage is not very high,” he said. “Actually, Australia has, most likely, higher flood coverage than many other privately underwritten jurisdictions.” 

Mr Hawkins says reinsurance pools are generally considered when there is a lack of risk appetite or capacity, such as with terrorism, but they can have value in increasing insurance penetration. 

“What we really need to discuss is, what is the best mechanism for increasing insurance penetration, for reducing the risk, and how do we subsidise those people who can’t afford insurance? And if we don’t want to do that, what do we want to do, and that’s where you end up in discussions around moving communities,” he said. 

Britain has introduced the Flood Re program to improve affordability and availability of cover, while the US has a government-backed arrangement for flooding. 

Mr Hawkins says climate change is increasing the frequency and severity of weather events and more needs to be done on mitigation and resilience. 

“We need to reduce the risk and as fast as possible, and that needs to be a concerted effort with those who have the knowledge, so the insurance and reinsurance industry, governments, people who are funding these risks,” he said. “In the end, if a risk is uninsured, we’re transferring that risk from one sector of the financial services industry to another, so if it’s not insured, it’s now not an insurance industry issue, it’s a banking issue.” 

The House of Representatives economics committee inquiry into insurers’ responses to the 2022 floods also heard on Friday from the General Insurance Code Governance Committee. 

QBE, Hollard and the Australian Financial Complaints Authority appeared on Wednesday. 

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