A body representing strata owners has called for a state-owned insurer like the Territory Insurance Office (TIO) to be set up in Queensland.

Strata Community Australia CEO Mark Lever told the House of Representatives inquiry into strata insurance TIO could be used as a model to create more affordable insurance in Queensland.

“The TIO is set up to facilitate access to insurance in the Northern Territory,” he said.

“This is not a new issue in tropical Australia in the sense that it has always been difficult to insure.”

Mr Lever says strata premium rates in Brisbane are about 7-10 cents per $100 insured value. In the Northern Territory they are 15-20 cents while in northern Queensland they are 45 cents.

“So two to three times the rates are being charged in north Queensland compared to those in Darwin,” Mr Lever said.

“How that occurs is really something we can only speculate about.”

He says Zurich claims the cost of capital and claims are the big driver in the premium increase.

“The cost of capital has no doubt gone up post-global financial crisis and post the big reinsurance events in recent years,” he said.

“The Northern Territory, because of the government guarantee, does not have to meet the capital adequacy standards and can effectively price the risk purely on the basis of the risk and not the cost of capital required to support that worst-case scenario.

“Essentially it operates on a very different cost basis because it does not have to service large amounts of capital.”

The issue of the Federal Government backing an expanded TIO to cover northern Australia was questioned by the committee. 

Mr Lever says government intervention in the insurance is not new, citing the Federal Government’s role after the HIH collapse and in the medical indemnity market.

“I am saying government intervention in the insurance industry is not particularly novel; it happens all the time,” he said.

“We are simply making the point that it is not something that needs to be considered as a terribly radical concept.”