Australia's infrastructure sector is feeling the effects of globally hardening insurance markets in which premiums are significantly increasing while coverage is reducing.71 Infrastructure sector insurance premiums have increased more than 20% over the past year, double global norms.72
While some increases are due to bushfires and other extreme events, premiums could be lowered if Australia's governments changed their risk practices. As buyers, beneficiaries and regulators of infrastructure, governments can reduce insurance costs by maturing their conversations with industry around risk. This will involve apportioning risk to the most appropriate party and avoid over-specifying coverage.
Governments can also reduce insurance costs by looking at innovative ways to use their sovereignty and buying power to broker insurance services on behalf of industry. Policies and costs could be novated to consultants, contractors and sub-contractors on a pro rata basis, similar to the approach used by Queensland's Department of Transport and Main Road's principal arranged insurance (PAI) model.73
Without these changes, there are likely to be fewer organisations that can participate in delivering publicly funded projects, considerable rises in bid prices, and reduced insurance coverage.