Small business numbers in disaster-affected regions keep falling for at least two years after a major event, well beyond the point where most insurance claims have been settled, according to research commissioned by QBE Insurance Group.
The study, conducted by Oxford Economics Australia and released under the title The Recovery Gap, tracked small business numbers across nearly 1,000 regions following seven major bushfires, floods, and cyclones between 2018 and 2023. QBE, which sells SME insurance in Australia, commissioned the research.
In the year of a disaster, affected communities had around 3% fewer businesses than comparable unaffected regions. That gap widened to 4% in year one and peaked at 9% two years after the event. By year three, affected communities remained around 7% below expected levels, representing roughly $36 million in annual economic activity that does not occur. The report does not specify whether this figure is per region, per event, or in total.
The report attributes the delayed peak to businesses drawing on insurance proceeds, savings, government assistance, and debt to stay open in the immediate aftermath. Closures follow once those combined resources are exhausted.
The findings raise questions about whether standard business interruption indemnity periods reflect actual post-disaster recovery timelines.
In its March 2026 submission to the Parliamentary Joint Committee on Corporations and Financial Services’ inquiry into small business insurance, the Australian Prudential Regulation Authority (APRA) noted that insurers would likely be cautious when providing business interruption coverage for businesses in regions at high exposure to extreme weather events. Those are the same regions the QBE research identifies as sustaining the worst long-term business decline.
Client preparedness compounds the problem. The 2026 Vero SME Index, which surveyed more than 1,500 Australian businesses, found that a third of small business owners were unfamiliar with the concept of business continuity planning, and a further 25% had heard of it but were unsure what it involved.
The 2025 Vero SME Insurance Index, which surveyed 1,750 businesses, adds a further layer: only 42% of businesses review their sum insured annually, over one-third had already experienced a negative claim outcome due to inadequate coverage. That finding suggests insufficient cover, not just expired cover, is part of the picture.
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The indemnity period review is a concrete starting point. Working through it with a client requires an honest estimate of how long premises would take to rebuild or refit, a realistic view of supply chain lead times for specialist equipment, and a sense of how long it would take to rebuild the customer base to pre-event revenue levels.
For a regional agricultural business or a manufacturer with specialist machinery, that combined timeline routinely runs well beyond 12 months. The QBE research suggests two to three years is a more accurate frame for the client profiles most exposed to long-term decline.
Business continuity planning unlocks the conversation. A client with a documented recovery process can identify their actual indemnity period requirement, access credit during recovery, maintain supplier relationships, and return to trading sooner.
Regional communities experienced more than twice the business decline of capital cities two to three years after a major event, linked to narrower industry bases and fewer logistics alternatives.
Industrial sector businesses in agriculture, mining, manufacturing, utilities, and construction recorded close to 10% fewer businesses than expected at years two and three. Small employers with one to 19 staff were 12% below expected levels three years after an event.
In the most severe events analysed – the 2019 Townsville floods, Tropical Cyclone Seroja in 2021, and the Murray River floods of 2022 to 2023 – communities had 21% fewer businesses than expected two years on.
Community resilience also proved decisive. Two years after a major disruption, business numbers in low-resilience regions were around 15% below expected levels. High-resilience communities were largely unaffected.
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Australia’s disaster bill is climbing. The Insurance Council of Australia (ICA) recorded almost $3.5 billion in insured losses from 264,000 claims across five declared events in 2025, compared with $581 million the year prior. Ex-Tropical Cyclone Alfred alone generated $1.5 billion across 132,000 claims.
In separate submissions to the parliamentary inquiry, the ICA noted that small business insurance premiums have risen by up to 60% since 2019, driven by outdated liability laws, rising legal costs, and regulatory complexity.
The National Insurance Brokers Association (NIBA) appeared before the same parliamentary committee in May 2026, presenting evidence on broker involvement in claims outcomes. NIBA CEO Richard Klipin told the committee: “When small businesses and not-for-profits have access to brokers, they receive better advice, more appropriate insurance coverage, superior claims outcomes, and greater confidence in the protection of their assets and livelihoods.”
NIBA also raised a structural issue: under the Corporations Act, small businesses buying commercial lines including business interruption, public liability, and professional indemnity fall outside the retail client definition, leaving them with weaker consumer protections than individuals buying home or motor cover.
QBE’s own catastrophe data from 17 significant weather events in 2025 recorded 2,403 small business claims at an average incurred cost of around $30,000, with total incurred costs of $78.8 million.
Ming Yiu Song, general manager of SME at QBE Australia Pacific, said: “Recovery is often measured by what has been rebuilt. This research highlights another side of the story: the businesses that never reopen, the opportunities that never emerge, and the growth that never occurs.”
