Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

I move:

That the Senate take note of the document.

The annual report of the Australian Reinsurance Pool Corporation for 2012-13 is a very interesting document for those of us who have been very concerned in recent years about the huge increases in insurance premiums in the North. Many of us who live up that way, many of us who represent those areas in this parliament, have not quite been able to comprehend why insurance premiums have risen so substantially in recent years. The common and simple response—I do not want to verbal the insurance industry—is that claims through cyclones have meant that in many instances the insurance business in North Queensland and Northern Australia is not viable. There was a stage when it was practically impossible to get insurance for strata title units in the North. Things have improved a little bit of late, and all credit and all thanks for that goes to the work of Senator Sinodinos when he was the minister in that area, and that work has been continued by Senator Cormann. The government has looked seriously at this and has given greater focus to the plight of those seeking insurance in the North, and there are some initiatives underway.

The Australian Reinsurance Pool Corporation is mentioned to me often. It was set up following 9-11 when the insurance industry felt that it was not in a position to cover all risks associated with terrorism. It meant that if you insured your place or your business or anything in Australia against acts of terrorism, you could not get insurance because the insurance companies, frightened by 9-11, just would not insure. There was a complete market failure. As result of that, the Howard government set up the Australian Reinsurance Pool Corporation, and it is the corporation's report that is before us today.

This is an interesting report. The corporation is an element of government activity that I suspect few senators are aware of. I must confess that I am no great expert on it. It has been suggested to me by people in the industry that this could perhaps provide a model if there is a market failure on insurance in the North. People refer me to New Zealand's Earthquake Commission. Again, my knowledge of that is limited, but in the broad, I understand it does a similar thing to the Australian Reinsurance Pool Corporation—that is, underwriting major events. We have the examples of earthquakes in New Zealand and of terrorism activities as they might impact upon insurable assets in Australia, and then we have risk insurance in northern Australia which is said to be caused because of the greater claims risk following some cyclonic events.

The Government Actuary did some work on the claims events, but unfortunately only took into account the period that covered Cyclone Larry and Cyclone Yasi, and did not go for the longer period when cyclones were not around. I have indicated to the minister that I really want the actuary to take a closer look at a wider period of time, because if you just take the years between two major cyclones you will get a bad-risk profile. But if you take it over the wider expanse of time, you will get a more realistic view of that. This Australian Reinsurance Pool Corporation is an interesting thing that can be looked at, and is something I will be looking into a bit further as it does provide some thought for things that might be done to address this problem.

Jan McLucas (Queensland, Australian Labor Party, Shadow Minister for Mental Health) Share this | Link to this | Hansard source

I also want to take note of the report from the Australian Reinsurance Pool Corporation, an entity which has been raised to quite extraordinary heights in Far North Queensland and in North Queensland, as the potential solution to the problems we have seen following quite large increases in our insurance premiums, particularly for strata title properties as well as for other insurance. Senator Macdonald is quite right—many of us cannot comprehend why these large rises in insurance have occurred, but he is also quite right to point to insurance companies having to make a judgement about what the real risk is in North Queensland. Insurance companies have to consider a whole range of variables, and one of them is climate change. This is not the direct driver of the growth in insurance—the biggest driver of growth in insurance premiums in the north is a re-evaluation of risk, particularly around strata title properties.

Senator Macdonald said he is quite interested in using the underwriting of the Australian Reinsurance Pool Corporation which, as he quite rightly said, was established to underwrite terrorist activities. A cyclone is not a terrorist activity so, in my view, it is quite inappropriate to use a tool where the market fail. You cannot insure for terrorism—Senator Macdonald is quite right about that. But to use a pool of money allocated for the uninsurable for what should be insurable in a realistic way, I think is a silly idea. We live in Far North Queensland and tropical North Queensland—we can predict that we will continue to have cyclones and, in fact, under climate change we will have more severe cyclones. I think the government thinks that as well, because their response in the budget was not to go down that track, even though some of Senator Macdonald's colleagues have suggested that that is a way to go forward.

Like Senator Macdonald, I will look closely at the response the budget proposed to the problems we are facing in North Queensland—a website that will assess the products that are available—and I have had some advice that questions the suitability of a website and what it might do for the market. The other proposal was to establish a fund taking $12.5 million out of the $70 million that had been allocated by our government for mitigation events to do engineering assessments of strata title units. That is not a bad idea, but the market is already doing that—CGU Insurance is out there doing that, and other insurance companies I have met with are also thinking about ways that they can work with our community to make sure we end up with sensible decisions about the real risk to properties in Far North Queensland and North Queensland, and particularly our strata title communities.

I want to take this opportunity to commend the work of James Cook University which, since Cyclone Althea, in my view has been the world leader in establishing work around the building code. This has meant that since 1985 houses built in North Queensland are built to a higher code that truly mitigates against real damage. We also have to look at the real cause for cost to an insurable property for strata title units. James Cook University is saying very clearly that the real impact is around water inundation, and not wind damage, so there is a lot of work to do. I remain committed to working with our community to work in a honest way—not a way that sets up expectations like Mr Entsch has done. I commend Mr Jones, the member for Herbert; and Mr Crisafulli, the member for Mundingburra, for taking Mr Entsch on and saying that his potential use of the Australian Reinsurance Pool is silly. I seek leave to continue my remarks later.

Leave granted.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

Mr Deputy President, under standing order 191, I would like to again be heard on the question that Senator McLucas has just spoken on—the Australian Reinsurance Pool Corporation. I would challenge what Senator McLucas has just said about my colleagues, but that would be debating and introducing new subject matter. I want to make it clear to Senator McLucas and to the chamber that I was not suggesting that the Australian Reinsurance Pool Corporation funds should be used for risk relief—

Jan McLucas (Queensland, Australian Labor Party, Shadow Minister for Mental Health) Share this | Link to this | Hansard source

On a point of order, Mr Deputy President: I understand that, under standing order 191, the senator has to say whether he feels he has been misunderstood or misquoted.

Stephen Parry (Tasmania, Liberal Party) Share this | Link to this | Hansard source

No, he does not have to say that. He has the right to do what he is indicating: he is correcting the record, if you like. He cannot enter into debate about this—and I am listening very carefully. He has not entered into debate yet. He is just giving an explanation of how he may have been misunderstood, which he can do—or he can correct something that he feels needs to be corrected.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

I am just suggesting that I think Senator McLucas may—quite genuinely—have thought that I was saying that we should use this corporation for Northern Australia. I was not saying that. I did not say that. If you thought I said that, you have misunderstood me. What I was saying was that the scheme introduced in relation to terrorism, which is manifested in the Australian Reinsurance Pool Corporation, is something that might ultimately have to be looked at in relation to insurable risks in Northern Australia.

Debate adjourned.