The general insurance industry has mixed feelings about a Federal Government review into disaster insurance, welcoming the chance to debate the issues but also wary about the outcome.

The wide-ranging review will examine why most insurers don’t provide flood cover, the role of governments, mitigation strategies, the need for subsidies for some sections of the community, and the formation by the Federal Government of a disaster reinsurance program.

Industry executives contacted by insuranceNEWS.com.au were generally happy with the review’s terms of reference announced on Friday by Assistant Treasurer Bill Shorten.

They say the appointment of one of the industry’s most experienced people, John Trowbridge, as chairman of the review committee will ensure the debate is balanced and useful, but some questioned the appointment of life insurance company executive Jim Minto and lawyer John Berrill, who has strong ties to the consumer movement.

Mr Trowbridge is a former leading actuary, general insurance company executive and retired as a Member of the Australian Prudential Regulation Authority last year. Mr Minto is MD of Tower Australia and Mr Berrill is a principal of leading plaintiff law firm Maurice Blackburn. He is also a member of the Consumers Federation of Australia and the Australian Lawyers Alliance.

Mr Shorten says the three-man committee, which will report to him on September 30, will independently review the issues relating to insurance in light of the recent disasters and “in the context of the long-term funding of disaster relief”.

He says the Government wants to ensure “appropriate national measures” are in place to foster more complete sharing of risk and equitable sharing of the cost of damage and loss resulting from floods and other natural disasters.

“This review is established to examine how best to achieve these objectives.”

He acknowledges that flood and cyclone victims should be able to choose where they live “in an informed way” and be aware of weather risks, but still be “able to obtain suitable protection, both in terms of having access to insurance and benefiting from appropriate mitigation strategies”.

The review panel will examine the extent of and reasons for underinsurance and non-insurance for flood and other natural catastrophes, and the ability of the industry “to offer adequate and affordable insurance cover for individuals, small businesses and governments” against flood and other natural disasters.

It will also look at what prevents the market from offering such cover and what measures could be taken to improve the ability to provide disaster-type insurance.

In contrast with the uncertainty of some industry executives, the Insurance Council of Australia’s (ICA) reaction to the review has been enthusiastic, with CEO Rob Whelan describing it as “a great opportunity… to contribute to current debate”.

However, he has also pointed out the need for other matters on ICA’s agenda to be discussed.

“While working towards a standard definition for flood and improved disclosure to enhance consumer understanding of insurance cover are important initiatives, there is still a lot of other work to do in the area of flood mitigation and mapping,” Mr Whelan said.

Mr Shorten is equally positive the review won’t detract from the Government’s discussions with the industry over a standard definition of flood and plain English in insurance contracts.

He says the review will “complement those ongoing discussions and provide a better understanding of exactly who should bear and manage risk in such tragic events”.