Changes to Australia's Terrorism Insurance Scheme have been approved and will be effective from 1 July 2017.
The changes extend the Scheme’s coverage and will ensure it remains fit for purpose.
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 A$50 million (US$37.5 million), whether used for commercial or other purposes (effective on contracts of insurance issued or renewed from 1 July); 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 changes were based on the 2015 Triennial Review by the Treasury. The law requires a review at least once every three years of the need for the Terrorism Insurance Act to continue in operation.
The Scheme is administered by the Australian Reinsurance Pool Corporation (ARPC), a corporate Commonwealth entity established under the Terrorism Insurance Act. The Scheme provides insurance cover for eligible terrorism losses, involving commercial property, associated business interruption losses and public liability.
In a statement, ARPC Chief Underwriting Officer, Michael Pennell, said that 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,” he said.