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What is the role of ARPC?

Australian Reinsurance Pool Corporation (ARPC) is a public financial corporation established by theĀ Terrorism and Cyclone Insurance Act 2003 (TCI Act). ARPC administers the Terrorism Reinsurance Pool (terrorism pool) and the Cyclone Reinsurance Pool (cyclone pool).Ā 

What is reinsurance?

Reinsurance is insurance for insurers. Reinsurance is the practice whereby insurers transfer portions of their risk portfolios to reinsurers to limit their own exposures and claims. Reinsurance allows insurers to remain financially stable, particularly following a large event or series of events.Ā 

Can insurers set their own premium rates?

Responsibility for setting insurance premiums stays with insurers, and they are responsible for commercial decisions on how they set them.

When are the pools triggered to pay losses?

For the terrorism pool, ARPCā€™s Minister must officially announce a Declared Terrorist Incident (DTI) before the provisions within the Terrorism and Cyclone Insurance Act 2003 can be triggered. Once a DTI is declared, The TCI Act overrides terrorism exclusion clauses in eligible insurance contracts, enabling coverage of eligible terrorism losses arising from a declared terrorist incident.Ā  For more information see the terrorism pool page.

For the cyclone pool, Australiaā€™s weather agency, the Bureau of Meteorology (BoM), will observe when a cyclone event begins and ends. The cyclone pool will cover claims for cyclone and related flood damage arising during a cyclone event, which lasts from the time a cyclone begins until 48 hours after the cyclone ends. For more information, see the cyclone pool page.

Cyclone Reinsurance Pool Consumer FAQs

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What is the purpose of the Cyclone Reinsurance Pool (cyclone pool)?

The cyclone pool is designed to lower insurance premiums for homes (including strata) and small businesses with high risk of damage due to cyclone and related flood, by reducing the cost of cyclone reinsurance, which is a significant cost component of premiums for these policies.

Do consumer policyholders have to join the cyclone pool?

No. The cyclone pool is a reinsurance arrangement between insurers and ARPC.

What classes of business are covered by the cyclone pool?

Home, residential and commercial strata, and small business policies. This includes:

  • Residential home and contents, including landlord insurance and farm residential buildings
  • Commercial property policies with maximum sum insured of $5 million or less across risks covered by the cyclone pool (property, contents, and business interruption) and
  • Residential strata, including mixed-use strata schemes, where 50 per cent or more of floor space is used mainly for residential purposes.

Is a strata building that contains short-term rental properties covered by the cyclone pool?

Insurance that covers properties with owner occupied, short-term and/or long-term rental apartments are included in the cyclone pool where:

  • the insured is a body corporate and
  • at least 50 per cent of the floor space is residential or the commercial portion of the total policy sum insured is less than $5 million.

Section 8B(3) of theĀ Terrorism and Cyclone Insurance Act 2003Ā provides a definition of a pool insurance contract that includes the building and contents of a strata or community title development where:

Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā (i)Ā  the insured isĀ the body corporateĀ for a strata or community title development; and

Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā  (ii)Ā  at least 50 per cent of the total floor space of the units in the development is used wholly or mainly for residential purposes.

Ā 

The Explanatory Memorandum provides further clarification stating:

  • ā€œBuilding and contents cover for strata title and community title developments are eligible for cover by the reinsurance pool and not subject to a maximum sum insured test, where at least 50 per cent of floor space of units in the development is used wholly or mainly for residential purposes and the insured is the body corporate.ā€ (Paragraph 1.59)
  • ā€œStrata arrangements that do not meet the 50 per cent threshold may still be eligible, subject to the maximum sum insured test (Paragraph 1.67).ā€Ā The maximum sum insured test is currently $5 million.

These points apply to short-stay accommodation or holiday rentals that are located on a strata or community title development and are insured by a body corporate under a strata or community title insurance policy rather than a business property insurance policy.

Whether a unit that is located on a strata or community title development, and that unit is used for short-stay accommodation or holiday rentals, is considered residential for the purposes of the 50 per cent floor space threshold, depends on whether that lot is used wholly or mainly for residential purposes. The Act does not define residential purposes, and this provides flexibility for insurers in implementation.

Short-stay and holiday rental insurance policies includingĀ those that cover Airbnbā€™s,Ā that are not part of a policy insuring a body corporate, are treatedĀ the sameĀ as business property insurance policies for commercial accommodation (e.g., traditional B&Bs, hotels, resorts, motels, caravan parks) and are eligibleĀ subject to a $5ā€ÆmillionĀ sum-insured limit.Ā 

Ā 

Example 1:

A building with a total sum insured of $40 million is made up of 25 per cent commercial activities (cafƩs, clothes shops etc.) and 75 per cent residential accommodation on a permanent and short-stay basis. The property is insured by a Body Corporate. This policy is likely to be an eligible cyclone pool policy because it is mainly residential and insured in the name of a Body Corporate.

Ā 

Example 2:

A building with a total sum insured of $3.5 million is privately owned and insured (not a Body Corporate) and is 100 per cent Airbnb. This property is likely eligible as a business under the $5 million threshold.

Ā 

Example 3:

A building with a total sum insured of $25 million is privately owned and insured (not a Body Corporate) and is 60 per cent Airbnb accommodation and 40 per cent shops. This property is likely ineligible as the building insured is not a Body Corporate and the total sum insured is over $5 million.

Ā 

Example 4:

A building with a total sum insured of $85 million that is owned and insured by a hotel. This property is likely ineligible as the building insured is a commercial hotel and the total sum insured is over $5 million.

When will consumers see premium reductions?

Policyholders in northern Australia with high cyclone and related flood damage risk should be offered reduced premiums by their insurer when they renew their policy once their insurer has joined the cyclone pool. To check if an insurer has joined the pool, click here.

Will the cyclone pool manage consumersā€™ claims?

No. Consumersā€™ claims will be managed by their insurer in the usual manner.

Will all policyholdersā€™ claims be treated equally?

ARPC has a contractual relationship to reimburse Insurers for the cyclone pool eligible claims they pay to policyholders.

Ā 

The amount of claim an insurer pays to a policyholder will depend on the conditions of the insurance policy. Each Insurer underwrites their own policy and there will be variations between policies available to consumers. For this reason, neighbours affected by the same loss event but insured with different insurers may experience different claims outcomes, depending on the level of cover offered by the insurers.

Ā 

Consumers should study the Product Disclosure Statement to check what level of coverage they have with their Insurer.

Terrorism Reinsurance Pool Consumer FAQs

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What risks does the Terrorism Reinsurance Pool (terrorism pool) cover?

The terrorism pool covers commercial and industrial buildings, mixed-use buildings with a floor space of at least 20 per cent used for commercial purposes, and high-value buildings with a sum insured of at least $50 million, whether used for commercial or other purposes. Ā 

Coverage includes fixtures, the contents within those buildings and associated business interruption. Eligible property also includes commercially owned infrastructure such as roads, tunnels, dams, railways, and pipelines as well as sites covered by a construction policy. Farms can also obtain cover if they hold insurance against business interruption.Ā 

The terrorism pool also covers declared acts of terrorism described as ā€œchemicalā€, ā€œbiologicalā€, ā€œpollutingā€, ā€œcontaminatingā€, ā€œpathogenicā€, ā€œpoisoningā€, or words of similar effect.

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Insurer customer logins to ARPC

Terrorism Insurer Portal (RISe)

RISe is ARPCā€™s Terrorism Reinsurance Pool (terrorism pool) insurer customer portal, which allows terrorism pool insurer customers to lodge their company information in a secure and user-friendly environment.

Cyclone Insurer Portal (PACE)

PACE is ARPCā€™s Cyclone Reinsurance Pool (cyclone pool) insurer customer portal, which allows cyclone pool insurer customers to lodge their company information in a secure and user-friendly environment.