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Natural Disaster Insurance Review

Natural Disaster Insurance Review

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Published by: ABC News Online on Nov 14, 2011
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Natural Disaster Insurance ReviewC/- The TreasuryLangton Crescent, PARKES ACT 2600 AustraliaPhone 02 6263 3340www.ndir.gov.au
30 September 2011
The Hon Bill Shorten MPAssistant TreasurerParliament HouseCANBERRA ACT 2600
Dear Assistant TreasurerWe are pleased to present our report on the Natural Disaster Insurance Review.The Review has attracted wide public interest, evidenced by over 100 written submissions andconsiderable public debate amongst experts and other interested parties. The Review Panel has alsoundertaken many stakeholder meetings, with representatives of all levels of government, insurers,consumer groups, hydrological experts and others, and made numerous public speeches andpresentations to diverse audiences following publication of our Issues Paper on 2 June 2011.The Review Panel wants to express its gratitude to the many individuals and organisations that havecontributed to the work of the Panel.Our key recommendation is to establish an Agency that will, for the first time, bring together floodrisk management and insurance in a manner designed to ensure the availability and affordability of flood insurance to all insured Australians.We commend the Report to you.Yours sincerelyJohn TrowbridgePanel ChairmanJim MintoPanel MemberJohn BerrillPanel Member
Issued by the Hon Bill Shorten, Assistant Treasurer, on 4 March 2011.
Recent widespread flooding and other extreme weather events have caused devastating lossesacross the nation. These losses have been borne by individuals and businesses, State and localGovernment, community organisations, the Australian Government, private insurers, andreinsurers.2
The Australian Government seeks to ensure that:
Individuals and communities affected by the floods and other natural disasters areable to recover and rebuild as quickly as possible.
People are able to choose where they live in an informed way.
Individuals and communities at risk of future flooding or other extreme weatherevents are aware of the risks but are able to obtain suitable protection against thoserisks, both in terms of having access to insurance and benefiting from appropriatemitigation strategies.3
The Australian Government is concerned to ensure that the appropriate national measures arein place to foster more complete sharing of risk and equitable sharing of the cost of damageand loss resulting from floods and other natural disasters throughout the nation. This Review isestablished to examine how best to achieve these objectives.4
The National Strategy for Disaster Resilience adopted by COAG on 13 February 2011 outlinesthe shared responsibility of individuals, governments, businesses and communities inpreparing for, and responding to, disasters.5
As part of the National Strategy, the Commonwealth, States and Territories will be workingtogether to support strategies to foster greater individual and community resilience, includinghaving adequate and appropriate levels of insurance cover, and the Heads of Treasuries willprovide a report to the National Emergency Management Committee (NEMC) on insurance bythe end of 2011.6
This Review provides an opportunity for an independent review of issues relating to insurancein light of the recent disasters, in the context of the long term funding of disaster relief. TheAssistant Treasurer and the Attorney-General will provide the outcome of the Review to theHeads of Treasuries for consideration in the context of their report to the NEMC.
The Review should be guided by the following principles:
Terms of Reference
Government intervention in private insurance markets is justifiable only where, and tothe extent that there is clear failure by those private markets to offer appropriate coverat affordable premiums.
The appropriate mitigation of risk by individuals and governments at all levels is akey objective.
Individuals and businesses should be encouraged to insure themselves wherepracticable.8
The Review will consider the arrangements for the insurance of the assets of Australianindividuals, small businesses and governments for damage and loss associated with flood andother natural disasters. In particular, the Review will consider:
The extent of, and reasons for, non-insurance and underinsurance for flood and othernatural disasters in Australia.
The ability of private insurance markets to offer adequate and affordable insurancecover for individuals, small businesses and governments for flood and other naturaldisasters.
Factors that may impede the private insurance market in offering such cover.
Measures that could improve the ability of the private insurance market to offer suchcover and the take-up of such cover by individuals, small businesses andgovernments.
The need for any further measures to enhance:(i)
consumer awareness and understanding of the scope and coverage of availableinsurance products.(ii)
claims management, dispute resolution and consumer assistance and advocacy services.
The effect or likely effect of the recent floods and other natural disasters on futureinsurance premiums in respect of such cover.
Whether there is a case for subsidising insurance premiums for individuals and smallbusinesses in the areas of highest risk facing the highest premiums.
Whether there is a role for the Commonwealth Government in providing disasterinsurance or reinsurance to the private sector, through mechanisms such as anational disaster insurance program, and, if so, what are the best options?
The impact or likely impact of any Commonwealth Government intervention indisaster insurance on the private insurance market.
The relationship between disaster mitigation measures taken by State and localgovernments against flood risks, and the impact of such measures, or the lack of them, on the availability and affordability of flood and other disaster insurance.9
The Review will also consider whether the existing Commonwealth and State arrangements fordealing with natural disaster recovery and resilience should be supplemented by theestablishment of a national disaster fund to support the rebuilding of public infrastructure inthe aftermath of events such as the recent floods.

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