Figures on the amount of insurance written by unauthorised foreign insurers (UFIs) dramatically understate the extent of the problem, according to Insurance Council of Australia (ICA) Executive Director Alan Mason.

He told the ICA Canberra conference that the Potts report into UFIs and discretionary mutual funds, which was commissioned by Treasury in response to HIH Royal Commission recommendations, contains misleading figures. The report suggested that the amount of Australian business going to UFIs is 2.5%.

“While it is impossible to calculate a precise figure, the local industry believes that is significantly understating the position,” he said. “We are not confident the recommendations of the Potts report actually address the core problems of driving business offshore to avoid tax.”

Mr Mason said figures from a leading Australian broker show that the proportion of business placed overseas has grown from 24% to 34.8% in two years.

He also cited a recent JP Morgan/Deloitte survey of insurance prices which found that the amount of business placed in the London market by Lloyd’s agents in Australia grew by 237% to $843 million over the past four years.

The Australian Prudential Regulation Authority is not expected to publish data on UFIs until next year.