RAJ CAIRNS REPORT


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AMAZING –Insurance premiums could be reduced 70 % if a Flood Pool was established


As noted, analysis by Allianz indicates that the total premium (inclusive of flood and

non-flood risk) including taxes3

for a NSW property with a sum insured of $350,000 in

a very high flood risk area (ie an ARI of 1 in 19 years), would be $7500 per annum.

Applying a flood claims cost cap of 5% of the sum insured would reduce this

premium by 70% – see Table 2.4

 

Among other things, Table 2 highlights the following:

• The premiums in the table are based on a property with a very high flood risk,

they would be commensurably lower for properties with a lower flood risk;

3

Taxes on NSW insurance policies: Fire Services Levy (23%); Stamp Duty (9%); GST (%10).

4

More detailed information on how Allianz prices flood and premiums relating to properties

with a lower flood risk are contained in a Confidential Appendix to this submission.

• Limiting insurers’ flood claims exposure significantly reduces premiums for

property owners with a flood risk;

• As noted above, premiums would be lower for properties with a lower sum

insured and hence the ‘capped’ premiums would be even more affordable;

• The removal of the Fire Services Levy in NSW would make a substantial

contribution to the affordability of insurance generally, and of flood risk

insurance premiums in particular;

• The removal of Stamp Duty on insurance, which applies in all States and

Territories, generally at a rate of 10%, would also materially improve the

affordability of insurance;

• The affordability ‘benchmark’ can be calibrated by moving the level of the

flood claims cost cap threshold to a level above or below 5% of the sum

insured;

• The relativities between the premiums for the different flood risk categories

could also be adjusted through various means, however, any move away

from actual flood risk-related relativities would introduce greater levels of

complexity (and cost) into the premium setting process

www.ndir.gov.au/content/submissions/issues_paper_submissions/Allianz_Australia_Insurance_Ltd.pdf.


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Flood Claim Pool is the only way to control Insurance Premiums——–A Flood Claims Pool would be established to pay the cost of flood claims over and above the capped amount paid by the insurer. In other words, any difference between the capped flood claim amount (eg $17,500) and the total value of the flood claim would be paid out of the pool to the insurer.


 

A Flood Claims Pool would be established to pay the cost of flood claims over

and above the capped amount paid by the insurer. In other words, any

difference between the capped flood claim amount (eg $17,500) and the total

value of the flood claim would be paid out of the pool to the insurer.

• Insurers would manage the claim as per normal based on their policy wording

and policyholder’s preferences (eg manage re-build or cash settlement).

• An overall per-event cap would limit insurers’ exposure to a particular flood

event. This could be based on a proportion of the insurer’s annual domestic

home and contents gross written premium (eg 10%). The cost of flood-related

claims in excess of the per-event cap would be paid by the pool.

• The total annual amount of an insurers’ potential exposure would be capped

by a limit on the number of events the insurer would be liable to cover in any

year (eg two events per annum). The total cost of all flood claims relating to

events in excess of the annual event limit would be paid by the pool.

- The capping of an insurer’s potential flood exposure would limit the

capital and reinsurance implications of providing flood cover and

‘accumulating’ large concentrations of flood risk exposure.

• Capping the amount of a flood claim that an insurer is required to pay,

reduces (but doesn’t eliminate) the premium an insurer would need to charge

a homeowner to cover flood and hence provides a mechanism for subsidising

flood insurance.

• In order to top-up the cost of flood claims from homeowners in receipt of

subsidised flood premiums, a Flood Claims Pool would need additional

funding. It is Allianz’s view that the most appropriate source of funding for a

Flood Claims Pool would be State and Local Governments.

 

 

 

 

 

www.ndir.gov.au/content/submissions/issues_paper_submissions/Allianz_Australia_Insurance_Ltd.pdf.


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Will the Insurance aggregator web site work in North Queensland when you have limited choice—-“Our main reason for putting this forward as far back as 2011 is that if really unaffordable premiums were left out there the Government would do something really stupid. The aggregator falls into that category.”—–Allianz GM Corporate Affairs Nicholas Scofield told insuranceNEWS.com.au


 

He says the Government’s proposal of an aggregator for north Queensland is likely to force prices up, not down, because most insurers’ appetite for the market is already satisfied.

“Our main reason for putting this forward as far back as 2011 is that if really unaffordable premiums were left out there the Government would do something really stupid. The aggregator falls into that category.”

 

 

 

Allianz calls for disaster reinsurance pool – Regulatory & Government – Insurance News – insuranceNEWS.com.au.


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Allianz calls for disaster reinsurance pool – ——-“Allianz remains of the view that a natural disaster reinsurance pool could be used to address the lack of affordability of home insurance premiums for those Australians facing high, weather-related insurance risks,” the submission says. “With appropriate government regulation, a natural disaster reinsurance pool could be established and operated by the insurance industry and funded by a modest levy on residential insurance policies, similar to the way the terrorism pool is funded by a modest levy on commercial property insurance policies.”


 

It says mitigation and adaptation are important but are unlikely to provide a “comprehensive solution” on their own.

“Allianz remains of the view that a natural disaster reinsurance pool could be used to address the lack of affordability of home insurance premiums for those Australians facing high, weather-related insurance risks,” the submission says.

“With appropriate government regulation, a natural disaster reinsurance pool could be established and operated by the insurance industry and funded by a modest levy on residential insurance policies, similar to the way the terrorism pool is funded by a modest levy on commercial property insurance policies.”

Allianz made similar submissions to the Natural Disaster Insurance Review following the 2011 Queensland floods.

The review recommended a “flood risk reinsurance facility”, but the Government did not adopt it.

 

 

 

 

 

Allianz calls for disaster reinsurance pool – Regulatory & Government – Insurance News – insuranceNEWS.com.au.


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North Queensland State requires only a referendum in QUEENSLAND not the approval of other States——New States chapter 6 of the Australian Constitution——-Chapter VI. New States. – Parliament of Australia—————-123. The Parliament of the Commonwealth may, with the consent of the Parliament of a State, and the approval of the majority of the electors of the State voting upon the question, increase, diminish, or otherwise alter the limits of the State, upon such terms and conditions as may be agreed on, and may, with the like consent, make provision respecting the effect and operation of any increase or diminution or alteration of territory in relation to any State affected.


 

Commonwealth Of Australia Constitution Act

121. The Parliament may admit to the Commonwealth or establish new States, and may upon such admission or establishment make or impose such terms and conditions, including the extent of representation in either House of the Parliament, as it thinks fit.

122. The Parliament may make laws for the government of any territory surrendered by any State to and accepted by the Commonwealth, or of any territory placed by the Queen under the authority of and accepted by the Commonwealth, or otherwise acquired by the Commonwealth, and may allow the representation of such territory in either House of the Parliament to the extent and on the terms which it thinks fit.

123. The Parliament of the Commonwealth may, with the consent of the Parliament of a State, and the approval of the majority of the electors of the State voting upon the question, increase, diminish, or otherwise alter the limits of the State, upon such terms and conditions as may be agreed on, and may, with the like consent, make provision respecting the effect and operation of any increase or diminution or alteration of territory in relation to any State affected.

124. A new State may be formed by separation of territory from a State, but only with the consent of the Parliament thereof, and a new State may be formed by the union of two or more States or parts of States, but only with the consent of the Parliaments of the States affected.

 

 

 

 

Chapter VI. New States. – Parliament of Australia.

 

 

 

Table of Provisions

View the Constitution as a single document (PDF 92KB)

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