ARPC reveals new cyclone reinsurance premium rates

ARPC reveals new cyclone reinsurance premium rates | Insurance Business Australia

Catastrophe & Flood

ARPC reveals new cyclone reinsurance premium rates

Discounts introduced for certain properties

Catastrophe & Flood

By
Roxanne Libatique

The Australian Reinsurance Pool Corporation (ARPC) has announced new premium rates for the Cyclone Reinsurance Pool, which will take effect on Apr. 1, 2025.

These rates will replace those introduced in October 2022.

The review also introduced discounts for strata properties that have implemented risk reduction measures.

Additionally, it maintained and adjusted the pricing algorithm to include newly registered addresses and respond to feedback from insurers to better align with current market practices.

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Cyclone Reinsurance Pool 2024 Pricing Review outcomes

The ARPC examined premium rates across different cyclone risk levels. It confirmed that the current pricing structure remains appropriate, particularly benefiting properties at medium and high cyclone risk.

The latest adjustments to the pricing model, particularly for strata properties, are designed to encourage further mitigation activities in cyclone-prone areas.

The review concluded that the cyclone pool’s rates continue to meet legislative goals. In particular, the introduction of discounts for strata buildings that take steps to reduce risk further supports the objectives of the cyclone pool.

Strata property discounts

According to the ARPC, premium discounts will be available to strata properties that complete qualifying risk mitigation measures.

These activities include retrofitting roofs, installing permanent window protection such as shutters, reinforcing vehicle access doors for low-rise buildings constructed before 1982, adding gutter overflows, and strengthening external doors.

Industry consultation process for Cyclone Reinsurance Pool pricing

The revised premium rates were developed following an industry consultation, which closed on July 26, 2024.

“ARPC thanks insurers that provided feedback to the consultation on cyclone reinsurance pool premium rates,” it said.

The ACCC report suggested that some insurers have started passing on cost savings to policyholders in these high-risk areas.

It noted that although the cyclone pool has helped lower premiums in cyclone-prone regions, other factors, such as a tightening global reinsurance market and increased building material costs, continue to influence overall premium levels.

The report showed a 27% reduction in premiums for home and contents policies in medium and high cyclone risk areas after joining the pool, compared to 12% reductions for similar policies before joining the pool.

For strata policies in the same risk areas, 16% saw reductions after joining the pool, compared to 10% prior to participation.

ARPC chief executive Dr Christopher Wallace responded to the ACCC’s findings, reiterating the agency’s commitment to collaborating with insurers to provide discounts for mitigation measures, helping to reduce premiums and strengthen resilience in cyclone-affected regions.