The Morrison Government has finalised the design of the reinsurance pool for cyclone and related flood damage, following consultation on the draft legislation.

The reinsurance pool will be backed by a $10 billion annually reinstated Commonwealth guarantee and be administered by the Australian Reinsurance Pool Corporation from 1 July 2022.

Over 880,000 residential, strata and small business property insurance policies in northern Australia are expected to be eligible to be covered by the reinsurance pool for the risk of cyclone and related flood damage.

The pool is expected to reduce insurance premiums by up to $2.9 billion for eligible household, strata and small business insurance policies over 10 years. Homeowners in northern Australia with the most acute cost pressures are expected to benefit from up to 46 per cent premium discounts, strata properties up to a 58 per cent discount and SMEs up to a 34 per cent discount.

Prime Minister Scott Morrison said the establishment of a reinsurance pool would deliver on the Government’s commitment to maximising northern Australia’s potential and to ensure Australians in cyclone-prone areas have access to affordable insurance.

“We’ve listened closely to our team including Warren Entsch and Phil Thompson so we can cut the cost of insurance for households, strata and small businesses,” the Prime Minister said.

“This is about making northern Australia even more resilient and liveable.”

Treasurer Josh Frydenberg said that the Government was committed to the benefits flowing through to policyholders as soon as possible, and had directed the Australian Competition and Consumer Commission (ACCC) to undertake price monitoring.

“As a critical integrity measure, price monitoring by the ACCC will provide transparency on how the benefits of the pool are being passed onto policyholders,” the Treasurer said.

Minister for Agriculture and Northern Australia David Littleproud said by reducing the insurance premiums in northern Australia, the Government is removing an obstacle to development so the great potential of the region is achieved.

“This will save households money and give them greater financial freedom and it will give businesses access to more capital to invest and grow,” Minister Littleproud said.

Minister for Emergency Management and National Recovery and Resilience Bridget McKenzie said this is yet another significant investment by the Government to ensure we are better prepared for disasters - before they strike.

“Northern Australia is particularly prone to extreme weather events and we want to support people and communities to mitigate against the damage that is caused when cyclones and flooding hit the region. This investment will give communities confidence that the Government is backing them to be better prepared,” Minister McKenzie said.

Assistant Treasurer Michael Sukkar said that the Government had listened to the feedback it had received throughout the consultation and design process and has made key changes to ensure the reinsurance pool delivers on its objectives.

“The Government has committed to expanding the pool to provide coverage for small business marine property insurance from 1 July 2023. We have also made adjustments to ensure that more strata properties will benefit from the pool,” Minister Sukkar said.

The Government intends to introduce legislation for the reinsurance pool in the first week of Parliament in February 2022, with the pool on track for the scheduled 1 July start date.