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Australia's regions are at risk of economic ruin following natural disasters
This report considers the role of insurance in restoring local economic activity and reducing the long-term impact of natural disasters in Australia. The analysis looks at the experience of three recent natural disasters: Cyclone Debbie, Tathra bushfires and Hobart’s floods. All three disasters had a devastating effect on local communities and economic activity, and unlike previous studies, this analysis considers the economic impact of insurance payouts made to those affected.
The report reveals that insurance plays a significant role in mitigating adverse outcomes and helping to restore normal economic activities following disasters regardless of their size. This is particularly the case in regional areas which have a high reliance on capital intensive sectors like resources, agriculture, and tourism. The value of insurance is also clear for areas that have limited employment opportunities or a narrower economic base compared to urban areas that can absorb the economic losses of a disaster more easily. Without insurance it is possible that a regional town may never fully recover from a disaster as damage can lead to a permanently impaired economic capacity.
With large parts of Australia at growing risk from tropical cyclones, bushfires, storms and floods, the importance of insurance is only increasing. Natural disasters are a traumatic experience for all those involved, however with insurance the impact of disasters doesn't have to be permanent.