The insurance industry has welcomed the Productivity Commission’s draft report on natural disaster funding.

The commission says funding should focus on risk mitigation at state and territory level rather than on nationally funded post-catastrophe relief.

Commissioner Jonathan Coppel says the current set-up discourages mitigation and encourages governments to expect Commonwealth-funded rebuilding.

QBE Australia and New Zealand CEO Colin Fagen agrees the emphasis should be reversed.

“The Productivity Commission’s draft report… clearly highlights the importance of prioritising mitigation in order to obtain the correct return on government investment,” he told insuranceNEWS.com.au.

He also welcomes the commission’s recognition of the role insurance plays in managing natural disaster risks.

The report recommends that state, territory and local governments and insurers explore opportunities for collaboration. It suggests the Insurance Council of Australia (ICA) could play a lead role in this.

“As the draft report highlights, information is critical to our ability to more accurately reflect the level of risk in the price of our premiums and to develop insurance products that are as accessible and affordable as possible for consumers,” Mr Fagen said.

Suncorp says the interim report lays the groundwork to improve mitigation and resilience in communities vulnerable to perils such as flood, fire and cyclone.

“Natural disasters remain one of Australia’s greatest economic threats,” a spokesman told insuranceNEWS.com.au. “Some work has already been done but there remains a lack of investment in mitigation and resilience.”

ICA CEO Rob Whelan has also welcomed the report.

“Australian governments have traditionally been too focused on handing out billions of dollars in an ad hoc manner following a disaster rather than looking at the long-term benefits of investing in permanent mitigation infrastructure to protect vulnerable communities,” he said.

IAG CEO Mike Wilkins, representing the Australian Business Roundtable for Disaster Resilience & Safer Communities, says the commission has recognised “the inefficiency and the inequality of current funding arrangements”.