A review into the governments Terrorism Insurance Act has recommended that the scheme to protect Australia’s markets in the event of a terrorist attack should stay in place.
The terrorism insurance scheme administered by the Australian Reinsurance Pool Corporation was designed following the 11 September attacks as a measure to alleviate a market failure in the event of an attack.
The scheme was also designed to address the wider economic impacts of global reinsurers refusing to underwrite loss or damage to commercial property due to terrorism.
The 2018 review has found that without the act there would likely be a market failure in the event of terrorism which would have wider economic implications.
The global commercial market capacity for terrorism reinsurance is considered short of the level required to cover against large incidents, with several reinsurers indicating they would struggle to participate without the reinsurance pool corporation.
The only change to the scheme was in the compensation the government received from the corporation with the review recommending an additional temporary dividend of $10 million annually until 2020–21.
The review recommended that the scheme currently not be extended to provide cyber terrorism coverage but it did not rule out changing that stance.
The recommendations were welcomed by the Australian Reinsurance Pool Corporation with its chief executive Dr Christopher Wallace saying it was good news for the industry.
“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,” Dr Wallace said.
Dr Wallace said the review was an important evaluation of the role and responsibilities of the corporation.
“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,” Dr Wallace said.
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