The Northern Australia Insurance Pool is scheduled to come into being in July 1 promising premium drops and improved access to cover for hundreds of thousands of property owners.
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The $10 billion scheme for the region will subsidise high premium costs in the north due to a high volume of disaster events.
In recent years, multiple floods, cyclones or other bad weather events have flattened and damaged properties, prompting insurers to hike premiums.
The legislation passed the Senate on Wednesday supported by the Coalition, Labor and Independents but was opposed by the Greens.
The scheme starts on July 1 with a review in 12 months.
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More than 500,000 property insurance policies are expected to eligible for the scheme.
The new legislation was welcomed by northern Queensland politicians including LNP Senator Susan McDonald.
"Residents and businesses will soon see significant reductions in what they have to spend on insurance," Senator McDonald said.
"But I again repeat my calls for the Queensland Government to remove the $65 million it collects in Stamp Duty on Northern insurance policies to give people even more costs-of-living relief."
Kennedy MP Bob Katter said a Townsville Chamber of Commerce survey found that 25 percent of the homes in North Queensland were uninsured.
"We pay $4000 for insurance per house, whereas in the rest of the country they pay $1500 per house. The oppressive rate of strata title insurance meant we couldn't get bank finance to build new apartment blocks in North Queensland," Mr Katter said.
"Allianz said if there was a reinsurance pool for North Queensland, they would provide insurance at the same rate as the rest of Australia. We have now got that insurance pool."
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