Should the Australian Reinsurance Pool Corporation be converted to a DISASTER POOL to cover reinsurance for North Queensland——— Australian Reinsurance Pool Corporation: 26 Jun 2014: Senate debates (OpenAustralia.org)
The annual report of the Australian Reinsurance Pool Corporation for 2012-13 is a very interesting document for those of us who have been very concerned in recent years about the huge increases in insurance premiums in the North. Many of us who live up that way, many of us who represent those areas in this parliament, have not quite been able to comprehend why insurance premiums have risen so substantially in recent years. The common and simple response—I do not want to verbal the insurance industry—is that claims through cyclones have meant that in many instances the insurance business in North Queensland and Northern Australia is not viable. There was a stage when it was practically impossible to get insurance for strata title units in the North. Things have improved a little bit of late, and all credit and all thanks for that goes to the work of Senator Sinodinos when he was the minister in that area, and that work has been continued by Senator Cormann. The government has looked seriously at this and has given greater focus to the plight of those seeking insurance in the North, and there are some initiatives underway.
The Australian Reinsurance Pool Corporation is mentioned to me often. It was set up following 9-11 when the insurance industry felt that it was not in a position to cover all risks associated with terrorism. It meant that if you insured your place or your business or anything in Australia against acts of terrorism, you could not get insurance because the insurance companies, frightened by 9-11, just would not insure. There was a complete market failure. As result of that, the Howard government set up the Australian Reinsurance Pool Corporation, and it is the corporation’s report that is before us today.
This is an interesting report. The corporation is an element of government activity that I suspect few senators are aware of. I must confess that I am no great expert on it. It has been suggested to me by people in the industry that this could perhaps provide a model if there is a market failure on insurance in the North. People refer me to New Zealand‘s Earthquake Commission. Again, my knowledge of that is limited, but in the broad, I understand it does a similar thing to the Australian Reinsurance Pool Corporation—that is, underwriting major events. We have the examples of earthquakes in New Zealand and of terrorism activities as they might impact upon insurable assets in Australia, and then we have risk insurance in northern Australia which is said to be caused because of the greater claims risk following some cyclonic events.
The Government Actuary did some work on the claims events, but unfortunately only took into account the period that covered Cyclone Larry and Cyclone Yasi, and did not go for the longer period when cyclones were not around. I have indicated to the minister that I really want the actuary to take a closer look at a wider period of time, because if you just take the years between two major cyclones you will get a bad-risk profile. But if you take it over the wider expanse of time, you will get a more realistic view of that. This Australian Reinsurance Pool Corporation is an interesting thing that can be looked at, and is something I will be looking into a bit further as it does provide some thought for things that might be done to address this problem.