The federal government’s finalisation of the northern Australia reinsurance pool for natural disasters has been met with fanfare from the Real Estate Institute of Australia (REIA).
Announced by Treasurer Josh Frydenberg on Monday, 7 February, in conjunction with the Prime Minister and several other ministers, the final design provides for the reinsurance pool to be backed by a $10 billion annually reinstated Commonwealth Guarantee.
Set to commence from 1 July 2022, the government expects more than 880,000 residential, strata and small business property insurance policies across northern Australia will be eligible to be covered by the reinsurance pool.
According to Prime Minister Scott Morrison, “this is about making northern Australia even more resilient and liveable”.
Mr Frydenberg indicated that the pool is expected to reduce insurance premiums by up to $2.9 billion over 10 years.
“Homeowners in northern Australia with the most acute cost pressures are expected to benefit from up to 46 per cent premium discounts, strata properties up to a 58 per cent discount and SMEs up to a 34 per cent discount,” he stated.
REIA president Hayden Groves has welcomed the confirmation of the reinsurance pool’s final design, having lobbied for the initiative, and with insurance premiums in northern Queensland “on average nearly 2.7 times higher than elsewhere”.
As well as the benefit it provides home owners across northern Australia, Mr Groves said, “this should also assist with continuing to stabilise rental affordability in these regions”.
The Strata Community Association (SCA) also applauded the news, after raising some red flags during the initial consultation process.
"There are several changes announced that have come directly from SCA advocacy efforts, including the intention to change the threshold from the originally quoted 80 per cent of residents down to 50 per cent in mixed use buildings to qualify for the scheme," SCA Queensland president Kristi Kinast said.
“Additionally, a review in 12 months was heavily recommended by SCA and will provide a chance to further advocate for the strata sector based on the outcomes,” she added.
Assistant Treasurer Michael Sukkar said the final version of the reinsurance pool took onboard feedback from the consultation and design process, with key changes made “to ensure the reinsurance pool delivers on its objectives”.
He said: “The government has committed to expanding the pool to provide coverage for small business marine property insurance from 1 July 2023. We have also made adjustments to ensure that more strata properties will benefit from the pool,” Minister Sukkar said.
The Treasurer outlined that the government has already directed the consumer watchdog (the Australian Competition and Consumer Commission or ACCC) to monitor prices and ensure the benefits flow through to policyholders as soon as possible.
“As a critical integrity measure, price monitoring by the ACCC will provide transparency on how the benefits of the pool are being passed onto policyholders,” he said.
By reducing the insurance premiums in northern Australia, the government is removing an obstacle to development in the region, according to the Minister for Agriculture and Northern Australia David Littleproud.
“This will save households money and give them greater financial freedom and it will give businesses access to more capital to invest and grow,” Minister Littleproud weighed in.
The government has reported that it intends to introduce legislation for the reinsurance pool in the first week of Parliamentary sittings for 2022.
ABOUT THE AUTHOR
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.