The Insurance Council of Australia (ICA) has responded enthusiastically to a call by the Australian Prudential Regulation Authority (APRA) for significant funding for investments in natural disaster mitigation.
ICA CEO Andrew Hall said the industry supported APRA’s view that substantial investments in mitigation were required to protect high-risk communities from the impact of extreme weather events such as cyclones, floods and bushfires, and thereby reduce pressures on insurance premiums.
In a speech delivered to the Australian Business Roundtable for Disaster Resilience and Safer Communities this afternoon, Australian Prudential Regulation Authority (APRA) executive board member Geoff Summerhayes said the “high, rising and volatile costs” of natural disasters was leading to declining insurance affordability and accessibility.
He said tackling the root cause “through greater investment in mitigation to protect homes, businesses and infrastructure from damage” was the most effective way of meaningfully and sustainably addressing the issue.
Hall said, “The clear and urgent message to all levels of government from APRA, and from many other organisations including the Productivity Commission and from numerous inquiries, is that investments in mitigation that reduce the physical risk to properties is the only sustainable way to reduce insurance premiums.”
“Without mitigation, the damage bill in vulnerable communities – northern Australia in particular – will continue to soar. At present only 3 per cent of natural disaster budgets are spent on prevention.
“The cost of inaction will ultimately cost governments and communities much more than sensible, timely and effective investments in prioritised mitigation programs.
“The ICA has been working closely with federal Treasury to identify areas of high exposure where mitigation projects should be considered as a priority. Many schemes are at an advanced stage and only require approvals and funding to go ahead.”