Market Update – October 2016
On 7 October 2016, Kelly O’Dwyer MP, Minister for Revenue and Financial Services, addressed the ARPC-OECD Global Terrorism Risk Insurance Conference. Below is an excerpt of Minister O’Dwyer’s speech:
On behalf of the Government of Australia, let me say how pleased I am to be able to participate in this important conference.
With the first three global terrorism reinsurance conferences having been held in the Northern Hemisphere, it’s really significant that the Australian Reinsurance Pool Corporation — in collaboration with the OECD — is hosting the first Global Terrorism Risk Insurance Conference here in the Asia-Pacific region.
The global and domestic threat of terrorism is very real. Australia and Australians have been touched by terrorism both at home and overseas.
In September 2001 the world was shocked by the scale and impact of Osama Bin Laden’s attacks in the United States. The real-time footage of the two World Trade Centre towers collapsing broadcast around the world demonstrated the scale of the attacks, the terrible loss of so many innocent lives, the bravery of first responders, as well as the physical damage to our cities and communities.
Australia witnessed terrorism closer to home when the popular holiday destination of Bali was struck in October 2002, the Australian embassy in Jakarta was bombed in September 2004, and Bali was again struck in 2005.
And the method of terror has changed and evolved. In recent years Europe has experienced terrorist attacks of a different nature, with attackers targeting almost simultaneously a music venue, sports stadium, bars and restaurants in Paris in November 2015, and more recently in Nice a truck drove through the Nice promenade, killing 86 women, men and children.
In Australia, in December 2014 we saw the Lindt café siege in Sydney, which saw the loss of two lives, and more recently the specific targeting of police, police employees and police stations.
And to meet this ever evolving threat we must ensure that we are equipped with an appropriate suite of measures to prevent, confront and respond to terrorist events.
We know we must protect not only our citizens, but also our infrastructure, our business communities and the wider economy. And as part of our suite of measures, we must have robust systems to deal with the financial implications of any terrorist act on our shores.
ARPC and the role of government
In the wake of 9/11, insurance and reinsurance companies around the world, including here in Australia, progressively withdrew cover for terrorism risk, raising concerns as to whether new investment projects would proceed and of a direct adverse effect on the value of commercial developments.
Following calls from the community for the Government to intervene in an area of clear market failure, in 2002 Australia’s then-Treasurer, the Hon Peter Costello AC, announced the development of the terrorism reinsurance scheme.
The scheme began in 2003 with a mandate to protect Australia’s commercial property sector — and, indirectly, the wider economy — from the economic losses caused by terrorism.
The Australian Reinsurance Pool Corporation administers Australia’s terrorism reinsurance scheme and plays a significant role in underpinning the financial stability and economic resilience of Australia.
Today, Australia’s terrorism reinsurance scheme provides up to $13.4 billion funding for claims, including access to a $10 billion Australian Government guarantee in the event of a Declared Terrorist Incident — or DTI — for commercial property, associated business interruption and public liability classes of insurance.
As a public financial corporation the ARPC performs a key function in the post-incident recovery phase by providing a known and defined financial response to an incident.
Read Minister O’Dwyer’s full speech here