Changes to the Australian Terrorism Insurance Act 2003
Following the 2015 Triennial Review, a number of changes have been made to the Australian Terrorism Insurance Act (ATIA) and its regulations whilst changes to the Australian Reinsurance Pool Corporation (ARPC) Scheme have also been implemented. These changes, highlighted in previous regulatory communications and outlined below, became effective on 1 July 2017.
Amendment of the Australian Terrorism Insurance Act 2003 – Acts Involving Biological or Chemical Material
As per Recommendation 10 of the Triennial Review, the Act has been amended and, in summary, the change adds item (c) to subsection 8(2) of the Act. This has the effect of extending the definition of a ‘terrorism exclusion’ or exemption (however described) in an ‘eligible insurance contract’ to include:
‘acts that are described using the word “chemical”, “biological”, “polluting”, “contaminating”, “pathogenic” or “poisoning” or words of similar effect’.
This amendment shall apply in relation to:
- an act or acts declared under section 6 of the ATIA to be a ‘declared terrorist incident’; and
- ‘eligible insurance contracts’ in force at that time (whether made before, at or after 1 July 2017).
Amendment of the Terrorism Insurance Regulation on Mixed Use and High Value Buildings
Following the signing of the Terrorism Insurance Amendment Regulations 2017, and in accordance with Recommendation 9 of the Triennial Review, the definition of ‘eligible property’ has been amended to include buildings that have a floor space of at least 20% used for commercial purposes or have a building sum insured of at least AUD 50m, whether used for commercial or other purposes eg residential. The change is now in effect on contracts of insurance issued or renewed from 1 July 2017.
Amendments to the ARPC Reinsurance Agreement for Terrorism Risks
For those syndicates that have opted in to the ARPC Scheme, please be aware that the following changes have now come into effect:
- The Retention Percentage has increased from 4% to 5% of gross Australian fire and industrial special risks (ISR) premium (Recommendation 3 of the Triennial Review).
- The maximum retention for individual Syndicates has been increased from AUD 10m to AUD 12.5m (Recommendation 4).
- The maximum industry retention has been increased from AUD 100m to AUD 150m, increasing further to AUD 200m after 30 June 2018 (Recommendation 5).
The ARPC has also taken the opportunity to make further amendments to the Reinsurance Agreement which becomes effective on 1 October 2017. A number of new provisions have been included within the revised Agreement, drafts of which have been previously shared with the market. A copy of the Notice of Amendment can be found as an appendix to the Australian Terrorism User Guide which is available on the Crystal page for Australia under ‘Terrorism’ in ‘Class specific regulations’. We would recommend that you familiarise yourself with this Notice of Amendment.
Further information
For further information please contact: