Insurers have welcomed the Northern Australia Insurance Premiums Taskforce’s initial findings which were released today, noting they give serious consideration to mitigation as an option to address affordability concerns.

The taskforce was set up to examine the feasibility of a mutual cyclone insurer or cyclone reinsurance pool.

The interim report draws no hard conclusions and says both options require further investigation.

However, it warns of the potential impact on government balance sheets – saying modelling will be carried out to estimate the level of risk – and includes a significant section on the benefits of mitigation.

“Mitigation should be an important component of any effort to reduce insurance premiums,” it says. “This was highlighted throughout the consultations, with some stakeholders suggesting it should be the main focus.”

Suncorp CEO Personal Insurance Mark Milliner told insuranceNEWS.com.au he is pleased mitigation is being considered as a valid way forward.

“That is what is going to create jobs and growth, rather than trying to orchestrate an expensive government scheme that is only going to cost Australians money,” he said.

“The average cost of cyclones is $650 million a year, and this would clearly put a great strain on the government balance sheet.

“There is plenty of competition – there is no market failure.”

Insurance Council of Australia CEO Rob Whelan has also welcomed the “practical and sustainable solutions” canvassed in the report.

“Government intervention through a taxpayer-funded mutual or a reinsurance pool would be an incredibly expensive and unnecessary interference in a functioning market,” he said.

“In all likelihood, intervention would not achieve the objectives the Abbott Government is seeking.”

Noting that the issue in north Queensland is its exposure to cyclones and the damage properties sustain, Mr Whelan says the focus “must be on improving properties and communities in cyclone-prone regions, rather than asking taxpayers to subsidise them indefinitely”.

The taskforce will continue to assess the feasibility of the mutual and reinsurance pool options, with the outcome presented in a final report before the end of November.