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Thursday, 26 June 2014
Page: 4138

Senator McLUCAS (Queensland) (18:09): 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. But a cyclone is not a terrorist activity and so, in my view, it is quite inappropriate to use this tool where the market has failed. 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, 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 have been 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.