Insurance losses are likely to grow by about 5-6% a year over the next decade, according to modelling for the Productivity Commission’s report on natural disaster funding.

But although nominal insurance losses appear to be rising, when adjusted for population growth, wealth and inflation the upward trend disappears.

“This suggests the rising cost of natural disasters can be explained by the rising exposure and vulnerability of communities to natural disasters,” the report, released last week, says.

Not only is the population growing, but more people are settling along the coast and urban fringe. Climate change may exacerbate their higher risk.

The report says 10% of natural disasters make up 80% of insurance losses.

The insurance industry has largely welcomed the report, with its recommendation that more funding should be allocated to mitigation and less to disaster recovery.

The commission calls on insurers to do more to inform consumers about their hazards and rebuilding costs, but the industry says that is not so easy under the rules on giving advice.

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