However, others are more sceptical, pointing out that ample capacity in many APAC markets removes the need for reinsurance pools.

“As things stand at the moment, we don’t have market failure that would require government intervention,” says Gareth Horne, a Sydney-based Partner with Clyde & Co. “We obviously have some fairly big projects being developed in Australia, but there is good capacity in the market. Even if the market turned harder, I would still expect a good broker to be able to find capacity in the international markets.”

A particularly significant project is the development of the SunCable Australia-Asia Power Link, one of the world’s largest solar power plants, which will be located in Darwin. Most of the energy produced will be exported to Singapore and South-East Asia via an underwater cable. Although this initiative will require sophisticated underwriting capabilities, Horne believes the Australian insurance market should be able to cope.

There are already other reinsurance pools in Australia, but these have only been established once it has become clear that the market is no longer capable of taking on a particular risk.

For example, the Australian government launched a terrorism reinsurance pool in 2003 in the wake of Al-Qaeda’s brazen attack on the World Trade Centre in New York. In July 2022 Canberra set up a new reinsurance pool for cyclone risk after a number of insurers said they were no longer prepared to underwrite the risk in flood-prone Northern Queensland.

Not everyone agrees with Horne’s assessment, though, and some think that, once a few large claims materialise, certain insurers may be forced to reconsider their position in the market.

“There’s a big question about what happens with climate change and weather-related events,” says Hiller from GCube. “Ultimately, if new projects become unbankable, then the market will need to find new solutions and so we could potentially see more of an interest in some kind of pool.”