New charge for Victoria's state-backed insurer of Suburban Rail Loop
The agency's finances have been hammered by payouts for those affected by natural disasters and the collapse of multiple home builders over the last three years. The October 2022 floods and insolvency of Porter Davis Homes contributed to $300 million in unexpected payouts alone.
Pearson said the VMIA would not require a cash injection because it had it a plan in place to improve its finances that included the charge and other 'upstream' measures to minimise claims.
He did not say the cost of the charge, claiming the details were commercial in confidence because they would reveal premiums charged to customers.
'Yes, there is a capital management charge that will be put in place to help improve the finances of the VMIA because of some of the natural disasters the state's confronted, but also the egregious behaviour of Porter Davis,' Pearson said.
'What I'm also saying, though, is the VMIA is not some passive, clip-the-ticket insurance provider.
'They work very closely with their clients to look at trying to improve and go upstream, to have more preventative strategies, which has a direct result in relation to premiums.'
The government expects the VMIA to get back to the midpoint of its preferred financial health range by June 2029.
Opposition finance spokeswoman Bridget Vallence said the charge meant the government was essentially taxing itself, as one of the VMIA's biggest clients, to repair the agency's parlous financial situation.
'Labor's new capital recovery charge will result in higher premiums, which will mean government departments will be forced to make more cuts to services,' she said.
'What is even worse, the government does not expect the VMIA to return to financial stability until 2029, another four years away, yet there is no credibility to this forecast given the VMIA is insuring the high-risk Suburban Rail Loop project.'
Loading
Symes promised 'no new taxes' in her first budget in May saying she had listened to the concerns of the business community.
While the VMIA capital management 'plan' was forecast in its annual report, released in October, there was no mention of the new charge.
The Allan government has also faced intense criticism for increasing the rate charged as part of its fire services levy, now the emergency services and volunteer fund, from July 1.
Residential charges will rise from 8.7 cents to 17.3 cents for every $1000 of a property's capital improved value, but primary producers will have their rates frozen after a backlash from farmers and concerns about the impact of drought conditions.
In the 2023-24 financial year, the VMIA had an operating deficit of $98.7 million driven by 'higher-than-expected claims experience across most portfolios', its annual report shows.
The agency paid out $678 million in claims, a 26 per cent increase on the year before, which included 5100 resolved domestic building insurance claims, paying out $193 million.
To offset the rise in claims and the soaring cost of construction, building premiums have been consecutively increased in 2023 and 2024, both by more than 40 per cent.
The VMIA has previously estimated responding to the Porter Davis insolvency alone lowered its funding ratio by 5 percentage points.
Flood and storm events in late 2022 were also the largest loss of state assets in the agency's history.
Their annual report also explains that the construction and material damage for the Suburban Rail Loop has 'one of the longest insurance policy periods issued at inception for any major infrastructure project worldwide'.
'These insurance products provide value to the state, through effective risk transfer for the project, and reinforce VMIA's expertise and track record of leveraging centralised risk to secure substantial insurance for commercially competitive pricing.'
Speaking at estimates, Pearson said he did not believe funding the Suburban Rail Loop had any impact on the VMIA's risk profile.
Representatives for the department confirmed they were not aware of any claims related to the project, which would be the only financial impact on the insurer.
A government spokesperson said the VMIA capital management plan was designed to return the body to an acceptable insurance funding ratio in the medium term.
'While year-to-year volatility in the VMIA's operating result is to be expected, the VMIA's long-term financial position is sound, and the VMIA is able to meet any obligation it may be called on,' they said.
Another government-backed insurance scheme, WorkCover, needed $1.3 billion in payouts to meet its commitments, prompting premium hikes of 42 per cent in 2024 and changes which limit mental health claims for burnout and stress.
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New charge for Victoria's state-backed insurer of Suburban Rail Loop
The agency's finances have been hammered by payouts for those affected by natural disasters and the collapse of multiple home builders over the last three years. The October 2022 floods and insolvency of Porter Davis Homes contributed to $300 million in unexpected payouts alone. Pearson said the VMIA would not require a cash injection because it had it a plan in place to improve its finances that included the charge and other 'upstream' measures to minimise claims. He did not say the cost of the charge, claiming the details were commercial in confidence because they would reveal premiums charged to customers. 'Yes, there is a capital management charge that will be put in place to help improve the finances of the VMIA because of some of the natural disasters the state's confronted, but also the egregious behaviour of Porter Davis,' Pearson said. 'What I'm also saying, though, is the VMIA is not some passive, clip-the-ticket insurance provider. 'They work very closely with their clients to look at trying to improve and go upstream, to have more preventative strategies, which has a direct result in relation to premiums.' The government expects the VMIA to get back to the midpoint of its preferred financial health range by June 2029. Opposition finance spokeswoman Bridget Vallence said the charge meant the government was essentially taxing itself, as one of the VMIA's biggest clients, to repair the agency's parlous financial situation. 'Labor's new capital recovery charge will result in higher premiums, which will mean government departments will be forced to make more cuts to services,' she said. 'What is even worse, the government does not expect the VMIA to return to financial stability until 2029, another four years away, yet there is no credibility to this forecast given the VMIA is insuring the high-risk Suburban Rail Loop project.' Loading Symes promised 'no new taxes' in her first budget in May saying she had listened to the concerns of the business community. While the VMIA capital management 'plan' was forecast in its annual report, released in October, there was no mention of the new charge. The Allan government has also faced intense criticism for increasing the rate charged as part of its fire services levy, now the emergency services and volunteer fund, from July 1. Residential charges will rise from 8.7 cents to 17.3 cents for every $1000 of a property's capital improved value, but primary producers will have their rates frozen after a backlash from farmers and concerns about the impact of drought conditions. In the 2023-24 financial year, the VMIA had an operating deficit of $98.7 million driven by 'higher-than-expected claims experience across most portfolios', its annual report shows. The agency paid out $678 million in claims, a 26 per cent increase on the year before, which included 5100 resolved domestic building insurance claims, paying out $193 million. To offset the rise in claims and the soaring cost of construction, building premiums have been consecutively increased in 2023 and 2024, both by more than 40 per cent. The VMIA has previously estimated responding to the Porter Davis insolvency alone lowered its funding ratio by 5 percentage points. Flood and storm events in late 2022 were also the largest loss of state assets in the agency's history. Their annual report also explains that the construction and material damage for the Suburban Rail Loop has 'one of the longest insurance policy periods issued at inception for any major infrastructure project worldwide'. 'These insurance products provide value to the state, through effective risk transfer for the project, and reinforce VMIA's expertise and track record of leveraging centralised risk to secure substantial insurance for commercially competitive pricing.' Speaking at estimates, Pearson said he did not believe funding the Suburban Rail Loop had any impact on the VMIA's risk profile. Representatives for the department confirmed they were not aware of any claims related to the project, which would be the only financial impact on the insurer. A government spokesperson said the VMIA capital management plan was designed to return the body to an acceptable insurance funding ratio in the medium term. 'While year-to-year volatility in the VMIA's operating result is to be expected, the VMIA's long-term financial position is sound, and the VMIA is able to meet any obligation it may be called on,' they said. Another government-backed insurance scheme, WorkCover, needed $1.3 billion in payouts to meet its commitments, prompting premium hikes of 42 per cent in 2024 and changes which limit mental health claims for burnout and stress.
Sydney Morning Herald
09-06-2025
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New charge for Victoria's state-backed insurer of Suburban Rail Loop
The agency's finances have been hammered by payouts for those affected by natural disasters and the collapse of multiple home builders over the last three years. The October 2022 floods and insolvency of Porter Davis Homes contributed to $300 million in unexpected payouts alone. Pearson said the VMIA would not require a cash injection because it had it a plan in place to improve its finances that included the charge and other 'upstream' measures to minimise claims. He did not say the cost of the charge, claiming the details were commercial in confidence because they would reveal premiums charged to customers. 'Yes, there is a capital management charge that will be put in place to help improve the finances of the VMIA because of some of the natural disasters the state's confronted, but also the egregious behaviour of Porter Davis,' Pearson said. 'What I'm also saying, though, is the VMIA is not some passive, clip-the-ticket insurance provider. 'They work very closely with their clients to look at trying to improve and go upstream, to have more preventative strategies, which has a direct result in relation to premiums.' The government expects the VMIA to get back to the midpoint of its preferred financial health range by June 2029. Opposition finance spokeswoman Bridget Vallence said the charge meant the government was essentially taxing itself, as one of the VMIA's biggest clients, to repair the agency's parlous financial situation. 'Labor's new capital recovery charge will result in higher premiums, which will mean government departments will be forced to make more cuts to services,' she said. 'What is even worse, the government does not expect the VMIA to return to financial stability until 2029, another four years away, yet there is no credibility to this forecast given the VMIA is insuring the high-risk Suburban Rail Loop project.' Loading Symes promised 'no new taxes' in her first budget in May saying she had listened to the concerns of the business community. While the VMIA capital management 'plan' was forecast in its annual report, released in October, there was no mention of the new charge. The Allan government has also faced intense criticism for increasing the rate charged as part of its fire services levy, now the emergency services and volunteer fund, from July 1. Residential charges will rise from 8.7 cents to 17.3 cents for every $1000 of a property's capital improved value, but primary producers will have their rates frozen after a backlash from farmers and concerns about the impact of drought conditions. In the 2023-24 financial year, the VMIA had an operating deficit of $98.7 million driven by 'higher-than-expected claims experience across most portfolios', its annual report shows. The agency paid out $678 million in claims, a 26 per cent increase on the year before, which included 5100 resolved domestic building insurance claims, paying out $193 million. To offset the rise in claims and the soaring cost of construction, building premiums have been consecutively increased in 2023 and 2024, both by more than 40 per cent. The VMIA has previously estimated responding to the Porter Davis insolvency alone lowered its funding ratio by 5 percentage points. Flood and storm events in late 2022 were also the largest loss of state assets in the agency's history. Their annual report also explains that the construction and material damage for the Suburban Rail Loop has 'one of the longest insurance policy periods issued at inception for any major infrastructure project worldwide'. 'These insurance products provide value to the state, through effective risk transfer for the project, and reinforce VMIA's expertise and track record of leveraging centralised risk to secure substantial insurance for commercially competitive pricing.' Speaking at estimates, Pearson said he did not believe funding the Suburban Rail Loop had any impact on the VMIA's risk profile. Representatives for the department confirmed they were not aware of any claims related to the project, which would be the only financial impact on the insurer. A government spokesperson said the VMIA capital management plan was designed to return the body to an acceptable insurance funding ratio in the medium term. 'While year-to-year volatility in the VMIA's operating result is to be expected, the VMIA's long-term financial position is sound, and the VMIA is able to meet any obligation it may be called on,' they said. Another government-backed insurance scheme, WorkCover, needed $1.3 billion in payouts to meet its commitments, prompting premium hikes of 42 per cent in 2024 and changes which limit mental health claims for burnout and stress.
