Home / Local / Northern Qld MPs confident on reinsurance pool
12 April 2021
Northern Queensland MP Warren Entsch says evidence of market failure in Australia’s north has increased the likelihood a reinsurance pool proposal will be supported in the next Federal Budget.
Mr Entsch, a long-time campaigner on insurance issues, says he has held positive discussions within the Government, which refocussed on the issue after the Townsville flooding in 2019.
“We have now got to a point where I believe we have been able to prove market failure,” Mr Entsch told insuranceNEWS.com.au. “I am quietly confident we will be able to get something up in the next Budget.”
Mr Entsch, a Liberal National Party of Queensland member representing Leichhardt, says a reinsurance pool could also provide catastrophe protection for other parts of Australia, although he has no specific details of models that may be under consideration.
A recent Australian Small Business and Family Enterprise Ombudsman insurance inquiry, which also looked at liability cover problems, recommended the Australian Reinsurance Pool Corporation (ARPC) mandate be extended beyond terrorism to include natural disasters.
Conversely, the Australian Competition and Consumer Commission (ACCC) three-year inquiry into northern insurance issues recommended against a reinsurance pool and said there was no market failure.
Bob Katter, representing the neighbouring Queensland seat of Kennedy, also says he would like to see the ARPC’s role extended.
Mr Katter, who formed Katter’s Australian Party and who sits on the crossbench, said last month after meeting with Prime Minister Scott Morrison that he is increasingly confident on the issue.
“We are getting very close,” he said. “I’m in a very strong position, even a powerful position. The Federal Government will make a very bad mistake if they think I’m not going to use that power. But the Prime Minister was very positive in the meeting.”
The Insurance Council of Australia (ICA) has focused on mitigation and planning issues to reduce risks rather than Government intervention in the form of pools.
Queensland-based Sure Insurance, which opposes Government pools, put forward a Catastrophe Event Provision (CER) model in a meeting with Assistant Treasurer Michael Sukkar.
MD Bradley Heath says the model would allow insurers to place funds in a tax-free reserve that could be drawn upon after a catastrophe, with no deduction when funds are spent.
“This is allowing insurers in the good years particularly to be able to fund a reserve to be able to pay for the bad years,” he told insuranceNEWS.com.au.
The net result to the taxpayer is zero, while the arrangement would help prevent jumps in premium expenses after major events.
The CER, similar in concept to the use of Incurred But Not Reported (IBNR) claims reserves, could be adapted to address affordability issues in areas, such as liability, Mr Heath says.