Tuesday, 19 September 2023

The Insurance Council of Australia (ICA) today welcomed funding in the 2023-24 New South Wales State Budget to support flood affected communities and improve disaster resilience, but said the hard work to reform insurance taxes and bring down the cost of insurance must be dealt with in future budgets.

New South Wales has the highest rate of insurance taxes in the country with insurance customers hit with both Stamp Duty and the Emergency Services Levy (ESL), meaning New South Wales insurance customers pay 20 to 40 percent in state taxes on top of their premium.

The Budget Papers show that the Government expects to collect $11.9 billion from insurance customers over the forward estimates – $5.1 billion through the ESL and $6.8 billion through stamp duty – which is around $1 in every $15 of all forecast tax revenue over the next four years.

New South Wales is the only mainland state to still tax insurance customers to fund emergency services, with numerous reports and reviews by past governments calling for the tax to be abolished.

Funding in the Budget for initiatives to reduce risk and improve disaster resilience is necessary and welcome.

This includes a new $150 million Community Restoration Flood Fund to support disaster impacted communities in the Northern Rivers and Central West and funding for timely and accurate hazard warnings, early warning systems for fires and floods, bushfire season hazard reduction teams, restoration of roads and delivery of housing in disaster-impacted areas, and deployable internet and mobile phone coverage during and after disasters.

With the Hawksbury-Nepean floodplain Australia’s largest unmitigated flood risk, the Government’s focus on housing affordability and construction of new homes must account for extreme weather risk in development planning to ensure residents of new housing in Western Sydney and across the state are not placed in harm’s way.

Quotes attributable to Insurance Council of Australia Acting CEO Kylie Macfarlane:

Last year’s flood emergency taught New South Wales a hard lesson about disaster preparedness, and funding in today’s Budget for risk reduction and disaster recovery is welcome.

But the best way to improve disaster resilience is to improve insurance coverage, and today’s Budget is a missed opportunity to progress much needed reform of insurance taxes in New South Wales.

A report released by the ICA in the lead-up to this year’s State election found that home insurance customers in New South Wales would see a reduction of around 15 per cent in their annual premium costs if the ESL was removed and a fairer way was found to fund emergency services.

The report found that because of the ESL, New South Wales insurance customers are paying nearly three times the amount of state taxes than Victorian insurance customers contributing to an estimated 13 per cent of NSW households being uninsured – double the rate in Victoria.

While the focus on new housing is welcome, it is incumbent on all governments to take practical steps to end development on floodplains to keep people out of harm’s way.

Monday, 18 September 2023

Representatives of the Insurance Council of Australia (ICA) will join Assistant Treasurer Stephen Jones in London and Munich this week to meet with global insurance leaders to discuss the impact of extreme weather risk on the Australian insurance market and premiums.

The high-level dialogue is the first of its kind and will bring together the Australian Government and local insurers with global reinsurers, brokers, insurers and industry bodies to improve understanding of the issues that are contributing to a widening insurance ‘protection gap’ in Australia and around the world.

The protection gap is the difference between the level of insurance that is required to recover from an event and the amount of insurance purchased, and is growing in Australia and around the world as a result of the impacts of extreme weather events, inflation, growing reinsurance costs and scarcer capital.

The delegation will include ICA President Nick Hawkins (CEO IAG), ICA board members Sue Houghton (CEO QBE Australia Pacific) and Steve Johnston (CEO Suncorp), and ICA CEO Andrew Hall.

It will meet CEOs and executives from organisations including global insurance marketplace Lloyds, insurance and reinsurance brokers Marsh McLennan, Guy Carpenter and Aon, reinsurers Munich Re and Swiss Re, UN Principles for Responsible Investment, insurance and reinsurance hub the London Market Group, UK Government agency Flood Re, and the Association of British Insurers.

This is the first time a minister has joined with Australia’s insurers – who are collectively responsible for insuring around 87 million risks annually – to engage with key participants in the global insurance sector.

The delegation continues the collaboration between the industry and the Federal Government following the establishment of the Hazards Insurance Partnership to facilitate better engagement on risk mitigation and management and the creation of the $1 billion Disaster Ready Fund to support risk mitigation projects.

Comment attributable to ICA CEO Andrew Hall:

The needs of insurance customers are at the heart of this exercise because in Australia and around the world insurance is under pressure, impacting customers from small and medium-sized businesses to homeowners in areas at high risk of extreme weather, to professions who require insurance to operate.

This week’s visit represents the next step in the collaboration between insurers and the Federal Government to try and improve outcomes for insurance customers in Australia.

Insurance is a fundamental part of Australia’s economy – without it we wouldn’t have the confidence to take risks and our economy would grind to a halt.

The protection gap – the difference between the insurance we need and the insurance we have – is worsening around the world, although Australia’s exposure to frequent and significant extreme weather events makes the issue even more acute here.

This issue affects all Australians and requires a shared solution with industry, government and customers all playing their part, and we warmly welcome the Assistant Treasurer’s very strong desire to help find those solutions.

Friday, 15 September 2023

The Insurance Council of Australia (ICA) today launched a new report outlining the important role insurers can play in managing and reducing risk in the natural environment.

The report, Valuing Nature for a Resilient Future, was undertaken by EY for the ICA, and details emerging insurance products and solutions that help protect Australia’s landscape from climate impacts.

Extreme weather events and biodiversity loss have been identified by the World Economic Forum as two of the top four global risks over the next decade.

The report identifies that failure to manage these risks comes with considerable costs to local and global economies, with more than half of the world’s economic output – US$44 trillion – highly or moderately dependent on nature.

This is important for the insurance industry because environmental degradation can lead to increased underwriting and investment risks as assets are less resilient to severe weather events, putting upward pressure on premiums and increasing claims.

The report outlines a number of ways insurers can help to protect the natural environment, including:

• Developing insurance products that protect natural assets like coral reefs and coastal defences.
• Investment in natural resilience solutions, such as a wetland restoration and reforestation.
• Working with governments and other stakeholders to develop and implement policies that protect nature.

The report also outlines how insurers’ innovative work can align with the global reporting framework for nature-related financial disclosures.

This framework will help to ensure that businesses and investors are aware of the risks associated with nature loss and the opportunities arising from products that protect nature.

This report builds on the release of the Insurance Council’s landmark climate change roadmap, Towards a Net Zero and Resilient Future, which outlined the way insurers can achieve net zero emissions for their operations by 2030 and across the entirety of insurers’ activities by 2050.

Comment attributable to Andrew Hall, CEO Insurance Council of Australia:

This report is an important tool for the insurance industry in outlining the risks to Australia’s natural environment and shows that insurers have a critical role to play in protecting nature and in turn protecting their customers.

Underwriting and investing in nature can play a key role in building resilience to climate change in landscapes and communities.

Nature-based mitigation solutions like reforestation and wetlands restorations can be used to reduce the incidence and impact of flooding, landslides, and other disasters.

Where initiatives like these serve to reduce risk, they also serve to better protect communities and ultimately moderate rising pressure on insurance premiums.