ARPC releases revised cyclone pool premium rates
The Australian Reinsurance Pool Corporation (ARPC) has released revised premium rates for the cyclone pool after completing a consultation on initial levels that highlighted concerns in WA and with some strata buildings.
As a result of additional information provided by insurers, a projected $776 million in projected annual premiums will now be collected by the pool, a 10% or $91 million reduction from the earlier estimate of $867 million.
The new rates are effective from the start of this month, with larger insurers having until the end of next year to apply the rates and smaller insurers no later than December 31 the following year.
ARPC CEO Christopher Wallace says lower premiums paid by insurer customers will ultimately result in lower premiums for consumers.
“Savings are expected to be higher in Northern Australia than in other areas, consistent with the policy intent behind the cyclone pool and the way premium rates have been designed,” he said. “In addition, policyholders currently paying the highest premiums should also see the greatest savings.”
The $91 million collection reduction reflects revised risk assessments for WA ($45 million) and for strata buildings ($17 million), and an increase to the non-insurance assumption in high wind risk regions ($29 million).
The consultation found that cyclone pool rates for Geraldton and Perth were identified as higher than current premiums, while more generally catastrophe modelling outcomes estimated larger losses than have been observed for recent cyclone events in the state.
A Finity report on the rate changes says a review was undertaken by Aon and insurer information examined.
“We found evidence compelling that an adjustment to WA wind rates was warranted from the Aon analysis and insurer feedback,” Finity says. “We were satisfied that the scientific and logical evidence was strong, not just that the previous results were out of line with market practice.”
The consultation also says there are a number of indications that the cyclone risk for large strata buildings, such as those with a sum insured of more than $20 million, benefits from better engineering and build strength.
The revisions show different insurance take-up rates for higher-risk wind zones.
“While it is hoped that the take-up of insurance will increase after the cyclone pool gets going, it is unrealistic to think it will match the rest of Australia for some time,” the report says.
