Australian Reinsurance Pool Corporation (ARPC) has welcomed the final report of the 2018 Triennial Review into the Terrorism Insurance Act 2003 (TI Act), released today by the Treasury.
“In the 2018 Triennial Review of the TI Act, the Treasury has recommended that ARPC continue to provide terrorism re/insurance covering the Australian commercial and high value residential property market,” said Dr Christopher Wallace, ARPC Chief Executive. “This is good news for the Australian business sector, the insurance industry and the broader Australian economy, which would rely on this coverage to recover from the effects of a Declared Terrorist Incident”, he continued.
The Australian Government established a terrorism insurance scheme (the scheme) on 1 July 2003 under The Terrorism Insurance Act 2003 (the Act). The scheme was designed as a temporary measure to alleviate a market failure and the wider economic impacts due to global reinsurers refusing to underwrite for loss or damage to commercial property due to terrorism following the events in the United States on September 11, 2001. The Act is intended to be a temporary measure to allow the re-emergence of a private reinsurance market for terrorism risk.
The TI Act requires that a review be conducted at least once every three years on the need for the Act (and the ARPC scheme which administers the TI Act) to continue. “ARPC exists due to market failure in the terrorism insurance market so the legislated triennial review of the Terrorism Insurance Act 2003 is an important test of our role and function,” Wallace emphasised.
The 2018 Review also considered and made recommendations on: the level of the dividend ARPC pays the Australian Government for use of the $10 billion Government guarantee and Government capital; whether the current pricing structure for risks covered by the Act and the approach to declaring a terrorism incident remains appropriate; whether there should be coverage for cyber terrorism resulting in physical property damage or for serious personal harm from a terrorism incident.
The 2018 Review recommended that the ARPC scheme not be extended to provide coverage for cyber terrorism “at this time” and that “the Government will continue to monitor developments”. The full report and recommendations can be found here.