ICA seeks extension of disaster resilience funding

The Insurance Council of Australia (ICA) has called for the Federal Government to introduce an inflation-indexed rolling 10-year resilience program, building on mitigation spending commitments delivered in the October Budget.

The Albanese Government’s first Budget provided $200 million annually to be invested in disaster mitigation for five years through the Disaster Ready Fund, delivering funding long sought by the insurance industry and recommended by the Productivity Commission.

ICA says in a submission ahead of the May Budget that a continuing commitment is needed given recent disasters and climate change, and it’s important funding doesn’t fall short over time, due to inflation. Land transport infrastructure and defence spending are funded through a rolling program, it notes.

Insured costs from natural disasters last year reached $6.76 billion, including February-March floods that were the costliest event ever for Australia and the second costliest in the world last year.

“We don’t have to look far in our past to see the impacts of extreme weather and why there is an urgent need for more investment and collaboration in disaster resilience to better protect Australian communities from worsening extreme weather,” CEO Andrew Hall said today.

A 10-year indexed program would cost the budget about $2.5 billion over the medium term, $1 billion less than the cost of disaster recovery payments and allowances in 2022 alone, ICA says.

The submission outlines nine policy areas identified as a priority for the Federal Government to put downward pressure on premiums and reduce extreme weather risks for communities.

They include finalising a national standard for considering disaster and climate risk in land use planning, funding to support National Construction Code amendments to strengthen home and building resilience, finding ways to incentivise states to remove insurance product taxes, and investment in a natural hazards database to better understand the risks.

“The Insurance Council is eager to collaborate with the Commonwealth in the Budget to develop further positive policies to improve the affordability and availability of insurance in a changing climate,” Mr Hall said.

ICA has welcomed the new Hazards Insurance Partnership and that National Cabinet has tasked planning ministers to develop a national standard for considering disaster and climate risk and Treasurers to consider ways to improve insurance affordability. It suggests National Cabinet should include a discussion of disaster mitigation at least twice a year.

The submission says any Disaster Ready Fund annual allocations not fully taken up in any year should be rolled forward, and that governments should work with insurers, including through the Hazards Insurance Partnership, to identify projects that will deliver the greatest benefits and help put downward pressure on premiums.

The ICA says the Budget should also establish a cyber insurance partnership and include funding for an investigation into the consequences and reinsurance options for catastrophic cyberattacks, including government backed reinsurance, and the related issues of cyber acts of war and cyber terrorism.

The submission supports policies to accelerate the transition to electric vehicles and promotes reforms to address problems experienced by some sectors in the public liability market.

It suggests funding for a national review of tort law and civil liability arrangements to examine the impact legislation is having on SMEs and their ability to access cover and proposes a $2 million a year program to provide training and improve risk management and national standards across sectors experiencing higher frequency of personal injury liability claims.