Transfer of Risk in 2025: Essential Guide for Australians

The concept of ‘transfer of risk’ sits at the heart of countless financial decisions, from the insurance policies you buy to the contracts you sign. In 2025, with a shifting economic landscape and new regulatory updates, it’s more crucial than ever for Australians to grasp what transferring risk means—and how it impacts everything from property purchases to small business operations.

What Is Transfer of Risk?

Transfer of risk refers to shifting the potential financial consequences of a loss from one party to another, usually via a contract or agreement. The most common example is insurance: you pay premiums so that your insurer covers specific losses if the worst happens. But the principle extends far beyond insurance, including property transactions, supply contracts, and even everyday consumer deals.

• Insurance policies: You transfer the risk of fire, theft, or accident to your insurer.

• Property sales: Contracts specify when the risk of damage moves from seller to buyer—critical in a hot property market.

• Business agreements: Suppliers and customers often negotiate who bears the risk for goods in transit or delayed deliveries.

Transfer of Risk in Insurance: 2025 Updates

Insurance remains the gold standard for risk transfer, but recent regulatory shifts in Australia are reshaping how these contracts work. In January 2025, the Australian Prudential Regulation Authority (APRA) introduced enhanced transparency rules for general insurers. These rules aim to ensure Australians better understand exactly what risks they are (and aren’t) transferring when signing up for a policy.

Key updates include:

• Clearer policy wording—insurers must now highlight exclusions and excesses more prominently.

• Natural disaster risk pools—with climate events on the rise, new government-backed pools help spread risk for flood and bushfire cover.

• Digital-first claims—most insurers now offer real-time risk status updates via mobile apps, helping customers see exactly when risk has passed to the insurer after a claim is lodged.

For example, when you insure your home, the risk of financial loss from fire or burglary shifts from you to your insurer—up to the policy limits and subject to any exclusions. But if you underinsure or miss a key exclusion, you might still shoulder some of the risk.

Property and Business: Contractual Transfer of Risk

In property transactions, the transfer of risk is a make-or-break detail. In most Australian states, the risk of loss or damage passes to the buyer either on settlement or when they take possession, depending on contract terms. With property values surging in 2025, buyers are scrutinising these clauses more than ever.

Consider this scenario: You sign a contract for a house, but a storm damages the roof before settlement. If the contract says risk passes at signing, you’re on the hook for repairs. If it passes at settlement, the seller bears the loss. In 2025, standard form contracts have been updated in some states (notably NSW and QLD) to clarify these timelines and reduce disputes.

In business, transfer of risk is equally critical. For example, a manufacturer may transfer the risk of loss in transit to the buyer once goods leave the warehouse. Clear Incoterms (like FOB or CIF) are now routinely included in commercial contracts, reflecting lessons learned from pandemic-era supply chain disruptions.

Managing Transfer of Risk: Tips for 2025

• Review contracts closely: Whether buying property or negotiating a business deal, know exactly when risk transfers and who is responsible for insurance until then.

• Check policy limits and exclusions: Insure for the full replacement value and understand what’s not covered.

• Use professional advice: Lawyers and insurance brokers can help clarify complex risk transfer clauses in contracts.

• Embrace digital tools: Use insurer apps or contract management platforms to track risk transfer milestones in real time.

Conclusion: Stay Ahead with Smart Risk Transfer

The transfer of risk isn’t just a legal technicality—it’s a financial safeguard that can make or break your investments and peace of mind. With 2025’s regulatory changes and evolving market conditions, Australians should be proactive: read contracts, ask questions, and ensure your risk transfer arrangements truly protect you. In a world where uncertainty is the only constant, smart risk management remains your best defence.