The Federal Government may need to consider further incentives to boost insurance competition in Northern Australia, a Parliamentary Committee inquiry into the Cyclone Reinsurance Pool says.

The committee says there have been calls for insurers to be given greater encouragement to provide cover across the region, with the Northern Territory in particular having limited options compared to other areas.

“If the anticipated benefits of the pool are not realised within the next several years, the committee encourages the Australian Government to consider additional incentives for insurers to join the pool, particularly those who have exited the market or never entered it in the first place,” an inquiry final report says.

The Australian Competition and Consumer Commission is tasked with monitoring prices, costs and profits as part of the pool’s introduction, and the committee says it should also monitor the situation more broadly and report on participation levels and instances of thin markets.

The Joint Select Committee on Northern Australia began its inquiry last year to understand why community expectations of cheaper insurance premiums in the region had not yet been met, despite the pool starting on July 1.

It heard delays were caused by the timing of information released by the Australian Reinsurance Pool Corporation, which operates the scheme, and because insurers had existing reinsurance arrangements. Large insurers have until the end of December to participate and smaller firms until the end of next year.

The report says it’s too early to propose major changes, but made recommendations for improvement after expressing concerns with the roll-out process to date.

“In this instance, the policy is not yet meeting its policy objectives because it is not fully implemented - most insurers are yet to join the pool,” the report says. “Whether the design of the pool is faulty, which would necessitate policy changes, cannot yet be determined based on the available evidence.”

The recommendations include providing future modelling well in advance of key dates. It says the Government should make clear its position on whether marine insurance will now be added, amid mixed messages, and suggests future reviews should consider the sum insured limit for business properties.

A legislated 2025 review should examine extending cover beyond 48 hours after a cyclone ends, and whether the pool should “sunset” for new builds past a certain date so it’s not subsiding future poor decisions, the report says, while noting the ability for earlier change on the 48-hour period if needed.

The report says the review should look at how to reinforce the insurance policy objective of the pool to move to parity of cost and access for all Australians, and recommends the Federal Government facilitate a coordinated approach to land use planning, building codes and resilience that involves the National Emergency Management Agency and other levels of government.

The committee intends to revisit the pool next year, once major insurers have joined, and small insurers have begun the work to move over reinsurance programs.