Changes to Australia’s Terrorism Insurance Scheme, as recommended by the 2015 Triennial Review by Treasury, have now been approved and are effective as at 1 July 2017.
The final report of the 2015 Triennial Review into the Australian Reinsurance Pool Corporation (ARPC) was released in Dec 2015 by the Treasury and considered a range of issues including scheme ownership, administration, fee retention, funding levels returned to government, premiums and the scope of the scheme.
The changes extend the Scheme’s coverage and will ensure it remains fit for purpose. ARPC Chief Underwriting Officer, Michael Pennell PSM, said the clarifications will benefit insurers and policyholders by filling the mixed use/high value building gap and removing uncertainty in the event of a Declared Terrorist Incident involving biological or chemical material.
“These changes will modernise Scheme coverage, underpin its financial strength, and ensure ARPC is better equipped to protect Australia from the economic losses caused by terrorism catastrophe.”
The ARPC is a public financial corporation that administers the government’s terrorism reinsurance scheme. In the event of a Declared Terrorism Incident by the Treasurer, the Terrorism Insurance Act will be activated and override any terrorism exclusion clauses in insurance policies.
The changes will:
• broaden the definition of eligible property to include buildings with a floor space of at least 20% used for commercial purposes or which have a building sum insured of at least $50 million, whether used for commercial or other purposes (effective on contracts of insurance issued or renewed from July 1); and
• amend the Terrorism Insurance Act 2003 to extend the definition of a terrorism exclusion or exception in an eligible insurance contract to include acts described as “chemical”, “biological”, “polluting”, “contaminating”, “pathogenic”, “poisoning”, or words of similar effect.
The Terrorism Insurance Amendment Regulations 2017 and previous regulations amendments can be viewed here.