Mutuals see greater role in disaster resilience

Mutuals can play a critical role in driving resilience and providing risk protection in catastrophe-prone areas and their benefits should be considered as part of policy discussions, an industry organisation says.

The Business Council of Co-operatives and Mutuals (BCCM) says disaster responses by co-operatives and member-owned businesses during the east coast floods have demonstrated the sector’s value in boosting resilience.

The group has called on Federal and State governments to establish a National Co-operative Disaster Recovery Centre of Excellence in Lismore to examine the sector’s role and to facilitate discussions as part of any strategy to “future-proof” vulnerable communities.

BCCM CEO Melina Morrison says Lismore and the northern NSW region has many co-operatives in financial services, agriculture and across the regional economy, including dairy group Norco, providing strong community connections that have been invaluable in responding to the catastrophe.

Discussions are emerging around insurance and risk mitigation within co-operatives, she says, as options such as self-insurance and risk pools are considered, and given the use of such models in other contexts.

“Already the conversations are turning to ‘what do we do about insurance after this’, so already you have a leadership circle, if you like, of businesses discussing it,” she told insuranceNEWS.com.au. “We are going to need to see more creative approaches to managing risk.”

Advantages of member-owned insurance arrangements can include lower operating costs and a stronger focus on mitigation by members who share a similar risk, BCCM says.

Ms Morrison says there’s a need to look broadly at the possible set of solutions, including what could potentially be taken on as self-insurance or within risk pools, the role of the existing market, potential government responses and other mitigation measures.

“What we would like to see is holistic, community-driven approaches to how we manage risk going forward,” she said.

BCCM has also called for amendments to the cyclone reinsurance pool legislation to ensure mutuals can access the benefit it offers in improving affordability.

Current drafting provides reinsurance cover for regulated Australian insurers and certain overseas underwriters, but it does not extend to discretionary risk mutuals offering insurance-like protection products.

“There is recognition we believe that it was an unintended omission,” Ms Morrison said. “There is a review planned and we expect to see that this omission is corrected.”

The government has committed to review the cyclone pool after a year, while the potential for changes also exists currently as the legislation is yet to pass the Senate.

BCCM says there are about 20 discretionary risk mutuals operating in Australia, with the sector having a combined annual turnover of more than $300 million and with more than $786 million in assets under management.