Title page 1

Contents 3

Executive summary 5

Key results 12

Key insights 13

1. Background 14

1.1. The government's cyclone reinsurance pool 14

1.2. The ACCC's role to monitor the cyclone reinsurance pool 15

1.2.1. Direction to monitor prices, costs and profits 15

1.2.2. How we monitor the impacts of the pool 16

2. Pool implementation and developments 18

2.1. Implementation and timeline 19

2.2. Claims on the pool 21

2.2.1. Declared cyclone events for 2025-2026 21

2.3. Changes to costs and pricing due to the pool 23

2.3.1. Changes to reinsurance arrangements due to the pool 24

2.3.2. Non-pool related changes to reinsurance arrangements 25

2.3.3. Change to pricing calculations due to the pool 26

2.4. Economic and environmental conditions influencing costs and premiums 28

2.4.1. Extreme weather events 28

2.4.2. Claims cost inflation 29

3. Pass-through 30

3.1. Insurers continue to pass through savings from the pool to policyholders 32

3.2. Timing of pool implementation and pass-through 34

4. Private mitigation 36

4.1. Mitigation frameworks 38

4.1.1. ARPC mitigation framework 38

4.1.2. Insurer implementation of mitigation frameworks 39

4.2. Communication with consumers about private mitigation 40

4.2.1. Collection of mitigation information by insurers 41

4.2.2. Mitigation information provided to consumers 42

4.2.3. Broader information relating to cyclone risk reduction 44

4.3. Premium reductions for cyclone mitigation 44

4.3.1. ARPC reinsurance premium mitigation discounts 45

4.3.2. Insurer estimates of average retail premium reductions for cyclone mitigation 46

4.3.3. Estimated premium reductions for mitigation can be small relative to implementation costs 47

4.3.4. Premium reductions alone are unlikely to motivate significant investment in private mitigation 48

5. Availability of insurance 50

5.1. Changes in insurer appetite towards underwriting in cyclone prone regions 51

5.1.1. Some insurers considered expanding their participation due to the pool, but decided not to 52

5.1.2. Some insurers have expanded their participation due to the pool 52

5.2. Barriers to entry and expansion into northern Australia 54

5.2.1. Ongoing challenges to increasing insurer participation in northern Australian insurance markets 55

5.2.2. Recent acquisition proposals 57

5.3. Emerging challenges in insurance availability in areas at risk of natural peril 58

5.3.1. Increasingly sophisticated risk analysis and tools may have mixed results on availability 58

5.3.2. Changes to underwriting flood risk and flood cover will have flow on effects to insurance availability 59

6. Home insurance 61

6.1. Home and contents insurance premiums 62

6.2. The impact of the pool on premiums 66

6.2.1. Results by wind risk band 66

6.2.2. Results by region and city 69

6.2.3. Results by insurer 72

6.3. The impact of the pool on insurers' costs 73

6.3.1. Breakdown of retail premiums 73

6.3.2. Insurer costs incurred 75

7. Strata insurance 79

7.1. Strata insurance premiums 82

7.2. The impact of the pool on premiums 85

7.2.1. Results by wind risk band 86

7.2.2. Results by region and city 88

7.3. The impact of the pool on insurers' costs 90

7.3.1. Breakdown of retail premiums 90

7.3.2. Insurer costs incurred 91

8. Small business insurance 94

8.1. SME building and contents insurance premiums 95

8.2. The impact of the pool on premiums 98

8.2.1. Results by wind risk band 98

8.2.2. Results by region and city 100

8.3. The impact of the pool on insurers' costs 102

8.3.1. Breakdown of retail premiums 102

8.3.2. Insurer costs incurred 103

9. Profitability of insurance 105

9.1. Our approach to profitability analysis 106

9.1.1. Sources of information and metrics used for our analysis 106

9.2. Whole of Australia 107

9.2.1. Insurers have seen profits for the third consecutive year 107

9.2.2. Profit margins vary across insurers and are volatile year to year 108

9.2.3. Loss ratios continue to improve across the industry 109

9.2.4. Profits are stronger in home insurance than other products 110

9.3. Northern Australia 111

9.3.1. Insurer profits in northern Australia have declined slightly 111

9.3.2. Insurer profits in northern Australia have been less volatile in recent years 112

9.3.3. Strata and SME insurance are more challenging markets for insurers in northern Australia 113

10. Consumer sentiment and experiences 115

10.1. Affordability 117

10.2. Availability 120

10.3. Private mitigation 126

11. Conclusion of the ACCC's monitoring role 133

11.1. Conclusion of the ACCC's monitoring role 134

11.1.1. A reinsurance pool is a complex intervention 134

11.1.2. The pool has met some of its objectives, but affordability concerns remain for many consumers 135

11.2. Supporting related insurance initiatives 135

11.2.1. The government and industry's Hazards Insurance Partnership 136

11.2.2. Treasury's 2025 Review of the Terrorism and Cyclone Insurance Act 2003 136

11.2.3. Joint Select Committee on Northern Australia's Inquiry into the Cyclone Reinsurance Pool 136

11.2.4. Independent Review of the 2022 Insurance Brokers Code of Practice 137

11.2.5. Select Committee on the Impact of Climate Risk on Insurance Premiums and Availability 137

11.2.6. Parliamentary inquiry into insurers' responses to 2022 major floods claims 138

11.2.7. Independent review of the 2020 General Insurance Code of Practice 138

11.2.8. Treasury's consultation on standard definitions and standard cover for insurance 139

Appendix A. Data collection methodology and limitations 141

Geographic classifications 141

Data collected from insurers 143

Analysis and classification of insurer data 145

Consumer survey 149

Appendix B. National data 150

Insurance premiums 151

Insurer costs 154

Profitability 155

Table 6.1. Average premium for combined home and contents insurance, by region, 2023-24 to 2024-25 64

Table 6.2. Average premiums for combined home and contents insurance, by cyclone risk, pre and post pool 68

Table 7.1. Average premiums for strata insurance, by region, 2023-24 to 2024-25 84

Table 7.2. Average premiums per $100,000 sum insured for strata insurance, by cyclone risk, pre and post pool 87

Table 8.1. Average premiums and percentage change for combined SME building and contents insurance by region, 2023-24 to 2024-25 97

Table 8.2. Average premiums per $100,000 sum insured for combined SME building and contents insurance, pre and post pool 99

Table 9.1. Gross loss ratio (GLR) and net loss ratio (NLR) for all home and contents insurance, by region, 2010-11 to 2024-25, adjusted for inflation 113

Table 10.1. Change in home insurance premiums at the respondent's most recent renewal by cyclone risk area 118

Table 10.2. Actions taken at the respondent's last home insurance renewal by cyclone risk area 119

Table 10.3. Approximate out-of-pocket cost of implementing risk mitigation measures in medium to high risk areas 130

Table 10.4. Recall of insurer information about risk mitigation in the past 2-3 years 131

Table 10.5. Recall of insurer information about impact of mitigation on insurance premiums 132

Boxes 24

Box 2.1. Reinsurance concepts 24

Box 2.2. Generalised process for calculating a retail premium 26

Box 3.1. Pass-through approach categories and examples 31

Box 3.2. Pricing practices which can impact pass-through 33

Box 7.1. How strata insurance is arranged in Australia 81

Box 8.1. Small business insurance has different characteristics to home insurance 95

Box 9.1. Measures of insurers' profitability 107

Box 10.1. Consumer survey significance testing and terminology 117

Box 10.2. Consumer survey mitigation example 131

Table A.1. Home building insurance policies in each wind band by CRESTA zone 142

Table B.1. Average premiums for home insurance, by region, 2021-22 to 2024-25 151

Table B.2. Average premiums for strata insurance, by region, 2021-22 to 2024-25 152

Table B.3. Average premiums for small business insurance, by region, 2021-22 to 2024-25 153

Table B.4. Average cost per policy, by region, 2021-22 to 2024-25 154

Table B.5. Profitability ratios for all home, contents, strata and small business insurance, by region, 2021-22 to 2024-25 155

Table B.6. Profitability ratios for all home and contents insurance, by region, 2021-22 to 2024-25 156