Victoria Gazettes Mandatory Five-Tier Flood Risk Ratings, and Insurers Say the Planning Rules Could Reshape Premiums Where Homes Are Built

The Victorian government has gazetted mandatory flood planning provisions, according to Insurance Business Australia on October 23, 2026. The change replaces a discretionary framework that insurers said led to inconsistent decisions between councils. At the centre is a five-tier Flood Risk Rating system, from FRR1 for low risk to FRR5 for extreme risk. The Department of Transport and Planning attaches planning and building controls to each tier. Land in the highest tier, FRR5, is described as an area where development is generally inappropriate and where the function of the floodplain must be protected. FRR4, the very high risk tier, should generally avoid development. At the other end, FRR1 land is managed through minimum building standards alone. Councils will have less discretion in how they apply the ratings than under the previous approach.

The reform follows a history of failures that the article sets out. In November 2025 the Victorian Ombudsman published a report on the Rivervue Retirement Village, which found that flawed Melbourne Water flood modelling and errors in building plans in the early 2000s led to the village being built in a flood hazard area. Residents were described as significantly out of pocket after the 2022 Maribyrnong River flood. The law firm Maddocks, quoted in the coverage, said the October 2022 floods affected 81 per cent of Victoria's local government areas, and warned that outdated flood mapping creates litigation risk for councils. Taken together, these points explain why the state moved from guidance to mandatory rules: the cost of building in the wrong place falls on residents, on councils and on insurers.

The Insurance Council of Australia, the industry body, backed the reforms. According to the article, it had called for mandatory rules in its submission on the draft guidelines. Its focus now is on how the rules are carried out. The council wants updated flood mapping to be shared with insurers through Risk Frontier's National Flood Information Database, so that premiums can reflect property-level data rather than broad assumptions. Kylie Macfarlane, the council's deputy chief executive, said: "The most expensive home is the one you build twice." She added that the priority now is consistent implementation, with councils applying the rules and insurers getting the latest flood maps.

The coverage gives two examples of how mitigation and pricing interact, and they point in different directions. In Wagga Wagga in New South Wales, a $23 million levee upgrade completed in 2020 gave the central business district protection against a flood with a one per cent annual chance of occurring. Even so, some renewal premiums rose from about $700 to nearly $9,000, and one quote for a central business district property topped $15,000, compared with under $5,000 for a Shepparton property that had flooded in 2022. In Roma, Queensland, by contrast, Suncorp cut property premiums by an average of 45 per cent after an initial levee was built following the 2012 floods. The article does not explain why the two outcomes differ, but the contrast illustrates why the council wants insurers to see current mitigation works and flood studies: whether a levee changes a premium depends on the data the insurer uses and how it models the remaining risk.

The affordability data behind the debate comes from the Australian Prudential Regulation Authority. In its Insurance Climate Vulnerability Assessment of March 2026, APRA found that home insurance premiums rose by an average of 7.2 per cent a year from 2010 to 2025, against annual wage growth of 3.1 per cent. As a simple illustration, over fifteen years a rate of 7.2 per cent a year compounds to roughly 2.8 times the starting level, while 3.1 per cent a year compounds to about 1.6 times, which shows how far premiums can outrun income over a long period. APRA projects that the share of uninsured households could rise from about one in seven today to one in four by 2050. The consequences of that trend would be borne by households after a disaster and by governments that provide relief.

The scale of exposure is large. Figures from the Insurance Council cited in the article say about 1.36 million Australian properties face severe to extreme flood risk, mainly in New South Wales, Queensland and Victoria. Declared events damaged more than 145,000 homes in 2025, a number that nearly matches the roughly 172,000 new homes completed nationally in the same year. Put another way, the damage from a single year of declared events was close to the whole year's new housing supply, which is why the council argues that planning decisions are central to affordability. Separately, Victoria announced $36.8 million in joint Commonwealth and Victorian funding for eleven projects under Round Four of the Disaster Ready Fund, administered by the National Emergency Management Agency, and the council highlighted levee projects in Epsom and Rochester. New South Wales and Queensland are also reforming how planning responds to natural hazards, which the council sees as a chance for greater national consistency.

For brokers and policyholders the article lists practical renewal questions. Does the flood component of the premium reflect current mitigation works? Which data sources does the insurer use? Do those sources include the latest flood studies shared with the National Flood Information Database? These questions matter because a property owner who has benefited from a new levee or a drainage upgrade may be paying for risk that no longer exists, while an owner in a newly rated high-risk area may see the opposite effect.

What to watch is whether councils apply the five tiers consistently, how quickly updated flood maps reach insurers, and whether other states follow. The article does not say when the provisions take effect for individual permit applications or how existing approved developments are treated, so those details remain for the state's guidance. The direction, however, is clear: the state has decided that flood risk should be assessed before homes are built, and the insurance industry is asking for the data flow that would let that decision show up in what households pay.