The Insurance Council of Australia (ICA) has unveiled a bold proposal for a $30.15 billion Flood Defence Fund (FDF) aimed at addressing the escalating flood risks in Queensland, New South Wales, and Victoria. The FDF is central to the ICA’s policy recommendations for the incoming federal government, with the plan designed to bolster flood resilience, reduce insurance premiums, and lessen disaster recovery costs over the next decade.
Strategic Allocation for Resilience and Risk Reduction
The ICA’s detailed policy document, “Advancing Australia’s Resilience,” outlines how the FDF would be structured, proposing a shared funding responsibility between federal and state governments. The fund would allocate resources across four main areas:
- $15 billion for new flood defence infrastructure, including levees and dams.
- $5 billion to strengthen flood-prone properties.
- $10 billion for managed relocation programs, such as property buybacks.
- $150 million to upgrade and maintain existing flood mitigation infrastructure.
The initiative comes in the wake of the devastating February-March 2022 floods, which resulted in 23 fatalities and $6.4 billion in insured losses. With over 1.36 million properties across Australia at risk of flooding, the ICA argues that investing in flood resilience measures is more cost-effective than continually funding post-disaster recovery efforts.
Escalating Flood Risks and Insurance Costs
Flooding remains Australia’s costliest natural disaster, wreaking havoc on homes and businesses each year. According to the ICA, approximately 298,000 properties, including 225,000 homes and 73,000 businesses, face a 2-5% chance of flooding annually. Many of these structures do not meet modern resilience standards, increasing their susceptibility to extreme weather.
The ICA warns that worsening flood events, compounded by inflation, rising asset values, and supply chain disruptions, are driving up insurance premiums. The Council predicts that, without substantial investments in risk mitigation, insurance premiums could become unaffordable for communities in high-risk flood zones, leaving millions of Australians exposed financially.
Additional Recommendations for Improved Resilience
In addition to the FDF, the ICA has proposed several policy initiatives to further improve disaster resilience and insurance affordability:
- Expanding the Disaster Ready Fund to ensure ongoing resilience funding.
- Enhancing flood mapping and hazard data to inform land-use planning.
- Supporting cyclone-proofing initiatives in northern Australia.
- Reviewing state-based insurance taxes and regulations to reduce costs.
- Strengthening small business risk management strategies.
- Addressing skills shortages in the motor trades and insurance industries.
The ICA advocates for a multifaceted approach to disaster mitigation, emphasizing that reducing exposure to extreme weather will yield long-term benefits for homeowners, businesses, and the broader economy.
Collaboration Between Insurers and Governments Needed
Andrew Hall, CEO of the ICA, called for stronger collaboration between insurers and governments to tackle the factors driving up insurance costs, including inflation, regulatory costs, and increasing climate risks.
“Given the ongoing cost-of-living crisis, it’s crucial that efforts focus on measures that will alleviate pressure on premiums, and this can only be achieved through a robust partnership between insurers and governments,” Hall said.
While long-term flood mitigation is crucial, Hall also called for immediate regulatory and tax reforms to provide short-term relief for insurance customers.
Targeting High-Risk Areas for Investment
The ICA’s policy document identifies 24 flood-prone catchments in Queensland, New South Wales, and Victoria where targeted investment could significantly reduce risks to life, property, and infrastructure. These regions include major river systems like the Brisbane, Hawkesbury, and Yarra Rivers. The ICA believes that large-scale flood defence projects will help reduce the frequency and severity of disasters, ultimately lowering insurance premiums for high-risk communities.
The proposal also supports the creation of a national flood infrastructure register to monitor and assess the condition and effectiveness of existing flood mitigation structures like levees and dams.
Next Steps for Policymakers
The ICA is urging both federal and state governments to prioritize investments in disaster resilience. According to the Council, failure to act now could lead to further declines in insurance affordability, leaving Australians at increased risk of financial exposure in the event of future floods.
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