Morrison dials up flood support for SMEs as insurance industry heads for “market failure”

travel warnings flood support

Prime Minister Scott Morrison. Source: AAP/Mick Tsikas.

Prime Minister Scott Morrison has confirmed he will increase the minimum disaster payments for Queensland and NSW businesses by $10,000 this week as communities grapple with the flood disaster recovery amid even more heavy rainfall on much of the NSW coast.

The conciliatory offer came after Queensland Premier Annastacia Palaszczuk wrote to Morrison last month asking for the Commonwealth to go 50-50 on a buy-back scheme for flood-affected properties — which was initially denied (though he later capitulated, agreeing to it).

As a consolidation prize, Morrison wrote back to Palaszczuk telling her he would increase the $15,000 payments for small businesses and not-for-profit organisations hit by the floods to a total of $25,000.

As with the original grant payment, only those in eligible LGAs are applicable, with more criteria here.

“The Commonwealth recognises there is more that can be done to provide additional, up-front resources to small businesses and not-for-profit organisations,” he wrote.

“I have authorised NSW raising the amount of … Recovery Grant payments from $15,000 to $25,000 for small businesses and not-for-profit organisations in LGAs highly impacted.”

“I ask [Queensland government] officials to work with the National Recovery and Resilience Agency (NRRA) on administration of the programs and reporting requirements.”

It comes as the insurance industry is headed for a “looming market failure” as Australians affected by flood disasters face skyrocketing costs to insure homes and businesses, a new report from KPMG warns.

Analysis showed national gross insurance premiums rose 10.6% last year alone — which is about five times the pace of wage growth in Australia.

“There is a looming market failure and potential significant risk of underinsurance for some locations and classes of assets as natural perils become uninsurable,” KPMG analysts found.

“The likelihood is the burden of underinsurance will continue to affect lower socioeconomic groups and have the greatest impact on regional Australia.”

KPMG forecasts premiums to surge again this year as the extreme weather caused by La Nina and a rapidly changing climate cause more extreme weather.

“Modelling predicts the frequency and severity of these natural peril event trends will only continue to increase,” analysts found.

It seemed like good news for the big insurers — profits were up 271%, amounting to some $3.4 billion in 2021 — but the joy will be short-lived.

“The increased likelihood of similar events going forward is a concern and could lead to more ‘up and down’ years [for insurance companies] in future,” KPMG’s report continues.

“Without preventative actions, more areas are expected to become uninsurable and the levels of under-insurance will inevitably increase.”

The report also noted the Reinsurance Pool would be backed by a $10 billion boost from the federal government to cover small business property insurance policies, as well as household and residential strata.

“The pool is designed to improve the accessibility and affordability of insurance for households and small businesses in cyclone-prone areas in Australia,” it says.

“Considering the recent east coast flooding, discussion has commenced as to whether the scope of the pool should be expanded to cover all flood damage (not just cyclone related damage).”

At least 2000 Sydneysiders have been forced to flee — some for the third time this month — after floodwaters threatened their homes and properties this week.

Early on Friday, evacuation orders were issued for people living in Cornwallis and the eastern part of Richmond lowlands, while on Thursday afternoon and evening residents of Chipping North and Camden were told to go.

There are major flood warnings for the Hawkesbury-Nepean Valley, as well as the NSW central coast and south coast after heavy rainfall soaked the Sydney, Shoalhaven and Wollongong regions on Thursday.

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