The millionaire businessman, who stepped down as the Ospreys' joint managing director last week, believes it would be an essential move to help halt a growing player-drain.
Mike Phillips, Lee Byrne, James Hook, Gethin Jenkins, Luke Charteris, Huw Bennett and Aled Brew are among current Wales internationals plying their trade in French club rugby.
And Cuddy said: "If the top Welsh players are to play and stay in Wales, it has to change. In a professional game where money talks and the sharks of France and England circle the Welsh game, there has got to be more investment by the governing body into the regions."
He claimed: "A mere £6million of the Welsh Rugby Union's earnings are returned to the regions in real terms.
"The rest is merely a case of them handing on television rights for the regional game, funds that belong to the four teams involved at that level.
"The full findings of the Pricewaterhouse Coopers report into the state of regional rugby have yet to be revealed, but they won't make pretty reading.
"All we seem to get at the regions is calls for more release time to the national team for our top players, and demands that they should be paid more wages to keep them in Wales.
"Something has to change if Welsh rugby is to carry on competing at the top end of the professional club game in Europe."
Cuddy, who remains a director at the Ospreys, said his personal view was that an ongoing relationship between the WRU and its four regional teams is Welsh rugby's "number one challenge".
"The last 10 years have been a constant battle for survival, and there is absolutely no doubt that had it not been for the backers, none of the regions could have survived," he added.
"It may not be everyone's cup of tea, but the old village mentality and parochial tribalism of Welsh rugby, which I loved by the way, was never going to be sustainable in the modern, professional era.
"The (Six Nations) Grand Slam of 2005 wasn't a coincidence, and it wasn't a coincidence in 2008 and 2012 either.
"Yes, the players were magnificent, and yes, the Union did a wonderful job at international level, but the foundation and context was, and is, a strong regional set-up."
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