The Turnbull Government is continuing to act to ensure that Australians have appropriate insurance cover and remain financially protected from acts of terrorism.
The Government has commenced the 2018 review of the Terrorism Insurance Act 2003 (the Act), which established a scheme for replacement terrorism insurance coverage for commercial property, associated business interruption and public liability claims. The Act also established the Australian Reinsurance Pool Corporation (ARPC) as a statutory authority to administer the scheme. Both the scheme and the ARPC began operations on 1 July 2003.
As the scheme was established as an interim measure, and was intended to operate only while terrorism cover is commercially unavailable on reasonable terms, the Act requires a review be undertaken every three years to assess the need for the scheme to continue in operation.
The 2018 review will be delivered to the Government by the end of the year and will undertake the following enquiries:
- whether there continues to be market failure in the private sector supply of terrorism insurance, and consequently whether there is a need for the Act to continue;
- whether scheme pricing could be enhanced to recognise and reward risk mitigation;
- whether there should be threshold level of losses to eligible property before commencing the process to declare a terrorist incident for the purposes of the TI Act;
- whether the strategic settings for the scheme design remain appropriate including:
- the appropriate level of payments to Government for fees for the Commonwealth guarantee and dividends to Government as the scheme owner;
- the appropriate level of net assets to be retained by ARPC to pay first losses and the retrocession reinsurance deductible; and
- whether the overall level of scheme pricing remains appropriate; and
- any other matters that Treasury consider of importance to the operation of the scheme.
Recently emerging issues
- whether the risk of cyber terrorism causing physical property damage should be included in the scheme by removing the scheme regulations exclusion for computer crime and over-riding policy exclusions for cyber terrorism; and
- the extent of coverage available for terrorism incidents causing harm to people including armed assault.
Interested parties are invited to write submissions, on the issues raised in the terms of reference, by 30 June 2018.
The Government looks forward to working with interested stakeholders to ensure that the scheme continues to be fit for purpose, and delivers better outcomes for all Australians.