Insurance costs for flood and cyclone-prone communities in northern Australia are expected to fall when a reinsurance pool is set up next year.
Announcing the initiative this week, the Federal Government said insurance premiums for households, strata, and small businesses north of the Tropic of Capricorn should drop by a combined $1.5 billion over 10 years.
The reinsurance pool, to be backed by a $10 billion government guarantee, is also intended to reduce significant rates of non-insurance rates across North Queensland, the Northern Territory, and the top end of Western Australia.
Prime Minister Scott Morrison said the reinsurance pool will encourage more insurance companies into the market by acting as “a floor underneath the industry”.
A Federal Treasury team will work with the insurance industry to deliver the final design of the reinsurance pool.
The Local Government Association of Queensland (LAQ) has advocated strongly for a reinsurance pool, and described this week’s announcement as “a welcome game-changer for councils and communities”.