The Territory Insurance Office (TIO) had a high concentration of risk and could not compete against national insurers, a Federal Senate committee has heard.

NT Treasury Undersecretary Jodie Ryan told the Economic References Committee the territory’s Treasury had wanted to divest TIO for years, because of the liability underwritten by the Territory Government.

“The board and management of TIO had looked at the operations and realised that because of the government guarantee they could not enter into business outside the territory, so the risk was narrow and they needed an opportunity to diversify that risk and allow the business to grow,” she said.

The Senate inquiry into the privatisation of public assets, meeting in Darwin last Monday, heard there was no public consultation on TIO’s sale last December to Allianz for $230 million.

Ms Ryan said the Government was trying to sell TIO as a commercial concern, “so we had to be very careful around what was out in the public, because it is a commercial-in-confidence process”.

Former TIO CEO Richard Harding told the meeting TIO had $30 billion of insured assets, of which 80% were in greater Darwin. It could not diversify its risk because of government ownership and was competing against national insurers with access to global markets.

TIO had to spend about 30% of its premium dollars on $700 million of reinsurance that would cover a one-in-250-year event. Cyclone Tracy, which devastated Darwin in 1974, was a one-in-600 or 700-year event, so another storm of that size would mean costs falling onto the Government.

Mr Harding says Allianz can wrap TIO’s exposure into its existing program and is capable of dealing with any losses that might occur in the territory.

“Risks of the nature of TIO and insurance are better dealt with in the private capital markets and the global capital markets of the world than they are by governments. That is why the world has gone through a privatisation process over the last 20 years.”

Labor Opposition Leader Delia Lawrie told the committee TIO was the “only no-loophole insurer providing full cyclone, flood and storm-surge coverage in the NT”.

She has heard of increased premiums since its sale, with people living in flood-prone Katherine paying thousands of dollars more.

Mr Harding says he understands Allianz has not changed premiums and is still providing the same products and cover. In recent years TIO raised prices by 60-150% to move to full-risk pricing, including for flood cover.

“Flood was the only exception and in the past two years we have started to move towards more risk-based pricing for flood insurance.”

Ms Lawrie told the hearing the Government may have sold TIO without getting any of the Federal Government benefit it expected.

“The Chief Minister told Territorians the TIO sale would be eligible for a 15% incentive payment, but we have seen no evidence that is the case – particularly given that no such program has been passed by the Federal Parliament,” she said.

NT parliamentarian Gerry Wood criticised the lack of consultation.

“TIO was a strange instrument of the NT: it was an insurance company that many people loved. You do not often love insurance companies.”