Regional Australia risks economic ruin if the incoming federal government fails to invest more in disaster mitigation as the effects of climate change take hold, Suncorp warns.

The insurer has released a report by SGS Economics & Planning that proves the importance of insurance in helping regional economies recover following natural catastrophes.

The report says a disaster’s initial economic impact on regional towns and cities can be equivalent to a major employer leaving, but insurance payments help minimise the damage.

Suncorp CEO Insurance Gary Dransfield says the study shows the crucial role insurance plays in recovery, but warns mitigation and resilience projects are also vital to ensure cover remains accessible to all.

“Some regional communities may never recover from a natural disaster without insurance, so we must work to ensure people are protected,” he said.

“The report found that without Suncorp’s insurance payouts following Cyclone Debbie, the Whitsundays would have suffered a permanent loss of 23% GDP.

“More than one in 10 Australians live in small regional towns, and many more in regional cities, yet despite the increasing risk, the [current] Federal Government continues to invest 97% of disaster funding in clean-up and recovery, rather than prevention.

“Very little funding is directed towards preventing natural disasters or making homes, businesses or communities more capable of withstanding the impact of fires, floods or cyclones – despite the Productivity Commission recommending in 2014 that the Federal Government should invest $200 million a year in mitigation.

“The next federal government needs to treat natural disaster mitigation and resilience projects as investments critical to the economic future of our country, otherwise millions of Australians will remain at risk.

“Only through committed action that builds resilience and reduces the increasing impact of severe weather events can we also shift the dial and make insurance more affordable for regional Australians.”

Suncorp says Australia’s 1700 towns with populations below 10,000 are most exposed to the economic impacts of natural disasters. Regional cities with larger economies, such as Lismore, Mildura, Busselton or Port Pirie, are also seriously at risk.

Report co-author Terry Rawnsley, Principal and Partner at SGS Economics & Planning, says the speed of the disaster response, and injection of funds, are critical to the strength of long-term recovery.

“If people see recovery occurring quickly after a natural disaster, it boosts confidence and encourages people to stay,” he said. “We know once people leave it is very hard to get them back, forever changing the community.

“Our changing climate will see the increasing prevalence and severity of natural disasters, which means there is a growing risk of Australia’s economic performance being undermined.”

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