Solution: Create a mandatory reinsurance pool for a concentrated regional peril, backed by a standing government guarantee, that collects premiums consistent with expected claims and pays claims from reserves - lowering the cost of cover and restoring insurer appetite in the exposed region.

Key challenge: Where a severe peril is geographically concentrated, insurers price for the concentration rather than the individual property, so cover in the exposed region becomes unaffordable or unavailable regardless of what any one owner does to reduce their own risk.

Context: The pool operates Australia-wide but targets support to the Northern Australian coastline, which carries a high risk of cyclones. It covers insured residential, mixed-use and commercial properties insured for under AUD 5 million, across urban, peri-urban and rural coastal areas. Australia faces average property insurance premium increases of around 14% and a projection that 1.3 million properties will be uninsurable by 2100.

Solution in practice: The Cyclone Reinsurance Pool, operated by the Australian Reinsurance Pool Corporation (ARPC), collects reinsurance premiums from insurers consistent with expected claims and operating expenses, and pays claims from those reserves. It is supported by an annually reinstated AUD 10 billion government guarantee backstop to cover extreme losses, which is increased to meet all obligations if exceeded in any year. Participation is mandatory for general insurers, with some exceptions. The data used in pricing includes geography, building characteristics and mitigation efforts, so property-level risk reduction is reflected rather than averaged away. Data published in 2025 confirms the pool has succeeded in lowering premiums: reductions of over 30% for small and medium enterprises, and greater insurer appetite to provide home insurance, with quote success rates rising from 66% to 84%.

Impact / outcome: Premiums down over 30% for SMEs; home insurance quote success rose from 66% to 84%.

Next steps: The measured outcomes make this unusually useful evidence: a mandatory pool with a sovereign backstop demonstrably restored both affordability and availability, and the quote success rate is a more direct measure of availability than premium alone. Two features are worth carrying into other designs. The pool prices on mitigation as well as geography and building characteristics, so it does not blunt the incentive to reduce risk - a common criticism of pooling. And the guarantee is annually reinstated and open-ended rather than capped, which is what allows private insurers to participate without holding capital against the tail. The playbook notes under action area 3b that both existing and new natural catastrophe risk pools could go further by incorporating place-level recognition, along the lines of the Community Rating System, into their design.

Organizations involved:

Authoring: Australian Competition and Consumer Commission (ACCC)

Actors: Australian Reinsurance Pool Corporation (ARPC); Australian Government

Implementation partners: Regulators & Policymakers; Insurers; Investors & Banks; Data Providers