Support for Government plan to open up insurance market

Banking Day staff
Insurance giant Lloyd's of London has thrown its weight behind a Government proposal to allow unregulated foreign insurers to operate in under-serviced segments of the local market.

Fairfax Media reported comments by Lloyd's chairman John Nelson, who said that injecting competition into Australia's tightly controlled insurance market would lessen the burden of catastrophe claims costs among local companies and diversify risk to global players.

Last year, Finance Minster Mathias Cormann revealed plans to improve affordability in the disaster-prone North Queensland market by allowing unregulated foreign insurers to write risk in the local market.

Cormann said too many Australian were in a position where they could not afford cover. Government Actuary figures show that insurers are paying out A$1.40 in claims for every dollar of premium income in cyclone-prone North Queensland.

Cormann's proposal has been controversial. Local insurers have complained that they would be at a competitive disadvantage and consumers would be at risk dealing with unregulated insurers.

Nelson said: "There is absolute economic sense, particularly for catastrophe risk, to open markets to international players. It means that if you have a catastrophe, you're pumping funds into the economy from outside the country. That is hugely restorative to the Australian economy."