Despite criticisms of the Queensland Government’s reinsurance arrangements, the Senate committee looking into the matter has ultimately backed Queensland’s claims that sufficient external insurance cover for the state was not previously available.

And the Queensland Government says its latest attempt to find reinsurance for its assets – including its roads – has also failed.

The Senate Economics Reference Committee report – The Asset Insurance Arrangements of Australian State Governments – was finally released last week after months of delays.

The committee found that although Queensland “appears to be the only mainland state that does not have external reinsurance arrangements, there does seem to be merit to the claim… that Queensland’s risk profile is different to that of other states”.

“Not only is there a higher incidence of flood and cyclone events than in other states, but its population and state assets are also more dispersed and its road network more extensive,” the Senate report says.

Meanwhile Queensland Finance Minister Rachel Nolan has revealed the state’s latest attempt to obtain reinsurance cover has failed.

The Government’s broker, Aon Benfield, conducted a $1 million international search of the market in July, approaching 15 Australian and 43 international companies for cover.

But while some offers of cover were made, none of them included the state’s 170,000km road network.

“The bottom line is that no one has been willing to provide an offer on a policy for Queensland’s roads,” Ms Nolan said. “That’s because it’s an enormous network, which as we’ve just seen can suffer very significant damage.”

Queensland’s floods and cyclones last summer caused $2.9 billion of damage to state-owned roads.

Ms Nolan says she still believes the Natural Disaster Relief and Recovery Arrangements (NDRRA) “are the best mechanism for funding natural disaster reconstruction”.

Aon Benfield submitted three options to the Queensland Government and will now provide them to the Federal Government to show it has acted in good faith in its search for reinsurance.

The Senate report calls for independent scrutiny of the latest quote to “allay concerns that Queensland is relying on NDRRA payments in preference to purchasing adequate insurance”.

In the course of the inquiry, the Queensland Government revealed that in 2004 it received a reinsurance quote for $500 million of cover with an excess of $20 million for a premium of $6.4 million.

Ms Nolan says that quote also didn’t include the state’s roads and the property assets proposed to be covered accounted for only $150 million of the $5.8 billion in estimated costs from the recent natural disasters in Queensland. The Government concluded at the time that the quote “did not represent value for money”.

While the committee found that all Australian states and territories have a captive insurer, it noted “the absence of a uniform approach to obtaining insurance and the lack of transparency in these arrangements” across all states.

One of its recommendations is for the Federal Government to “consult with state and territory governments to ensure that the states’ and territories’ captive insurance and reinsurance arrangements are reported transparently and on a comparable basis”. 

The committee also recommends that the Natural Disaster Insurance Review chaired by John Trowbridge, which is due to report to the Government by September 30, looks into whether the international insurance market offers reinsurance for state and territory road networks.