Questions continued to be asked about why the Queensland Government chose not to reinsure some of its risk.

Under Treasurer Gerard Bradley admitted to the inquiry in Canberra by the House of Representatives Standing Committee on Economics into the proposed flood levy that the natural disaster funding arrangement with the Commonwealth Government was a factor in Queensland’s decision not to buy reinsurance.

“We did not take that decision in relation to natural disaster events because of the long-standing arrangements which are in place for natural disaster at a national level,” he said.

Mr Bradley says reinsurance was not considered “value for money” and that some of the other states that do purchase reinsurance had advised Queensland that their reinsurance covers generally do not include road infrastructure.

He says 80% of the cost of the floods and Cyclone Yasi relates to roads, “so the availability and cost of seeking reinsurance for that infrastructure would be a major challenge”.

However, Insurance Council of Australia (ICA) GM Policy, Risk and Disaster Planning Karl Sullivan told the inquiry that reinsurance covers could be purchased that don’t necessarily insure particular assets such as roads, but do provide funds in the event of a natural catastrophe.

“You may not be ensuring a bridge or a road or a particular building,” he said. “In this context you would be funding yourself for the contingency funds that would need to flow. Then it would be up to you where you allocate them going forward. That might be to particular assets or it might be to community stimulus.”

Mr Sullivan says “parametric covers” have been available in the reinsurance market for more than a decade.

“There are certainly products available,” he said. “They are highly configurable, and you can accept as much or as little of the risk as you like.”

Independent senator Nick Xenophon says he believes Queensland has previously been offered full and affordable reinsurance cover.

He told the ABC last week he wants to know if the Queensland Government was offered natural disaster insurance that included roads for a premium of less than $50 million “as far back as 2000”.

“I think the Queensland Government needs to show us the documents in terms of offers that were made back in 2000 and more recently in 2004.”

Mr Sullivan says that aside from providing funding in the event of a natural catastrophe, buying reinsurance would provide an incentive to state governments to better manage and mitigate their risks in order to minimise premiums.

He told the inquiry that ICA has advocated the ceding of natural catastrophes risks to the global reinsurance market to avoid the need for future levies.

“Our position is that perhaps this presents an opportunity to look for a better mix that encourages state governments to rely less on other governments.”