General FAQs
This section includes General FAQs on scheme coverage and a separate Q&A on Scheme Changes as a result of the 2015 Triennial Review.
Eligible Insurance Contracts
Does ARPC cover “rolling stock”?
Rolling stock is excluded from the scheme under Item 26 of Schedule 1 of the Terrorism Insurance Regulations 2003 (Cth). Trains, trams, or other railway vehicles may be covered in the course of manufacture, however as soon as the vehicle is operated or used on a railway it is considered “rolling stock” and is excluded from the scheme. Further details are available in our guidance note here.
How does a global terrorism policy affect eligibility?
The existence of an overarching global terrorism policy does not affect the eligibility of a separate contract of insurance issued by another insurer, such as a local insurer. If the policyholder has purchased eligible insurance even thought they have a global policy that provides full cover for terrorism, the insurer that issued the eligible policy will still be required to pay ARPC the appropriate reinsurance premium if they have a treaty Agreement with ARPC. It is most likely that the terrorism reinsurance cost will be passed on to the policyholder.
Are Biological, Chemical, Pollution or Contamination Exclusions considered to be Terrorism Exclusions for the purposes of the TI Act?
Yes. An exclusion or exception (however described) for: a) acts that are described using the word “terrorism” or “terrorist” or words of similar effect; or b) other acts (however described) that are substantially similar to terrorist acts as defined in section 100.1 of the Criminal Code; or c) acts that are described using the word “chemical”, “biological”, “polluting”, “contaminating”, “pathogenic” or “poisoning” or words of similar effect …is considered to be a terrorism exclusion clause for the purposes of the TI Act and will be ineffective in the event of a Declared Terrorism Incident. Therefore, acts of terrorism involving biological or chemical material are covered by the scheme.
Does a terrorism sub-limit render a policy ineligible?
No. A sub-limit does not render a policy ineligible. Sub-limits fall under the definition of an ‘exclusion or exception (however described)’ within the meaning of s 8(2) of the TI Act. As such, a sub-limit for terrorism cover in an ‘eligible insurance contract’ will have no effect in relation to a loss or liability to the extent to which the loss or liability is an eligible terrorism loss under the TI Act. Full terrorism reinsurance premium is payable to ARPC by insurers who have a Reinsurance Agreement with ARPC and issue policies that sub-limit cover for terrorism losses.
Are forklift trucks or other mobile equipment excluded from the Act?
Schedule 1, Item 18(a) of the Terrorism Insurance Regulations 2003 refers to the types of contracts of insurance which are not eligible insurance contracts for the purposes of the Terrorism Insurance Act 2003. Item 18 (a) excludes a contract of insurance for a motor vehicle (other than movable machinery or equipment, used in mining or construction activities, that would not ordinarily be registered to travel by road). Consequently, the eligibility of contracts of insurance covering forklifts and other movable machinery or equipment will depend on whether or not the assets are ‘movable machinery or equipment, used in the mining or construction activities, that would not ordinarily be registered to travel by road.’
Does the scheme cover medical indemnity insurance?
No. The TI Act provides terrorism cover for eligible property by making terrorism exclusion clauses ineffective in the event of a Declared Terrorism Incident. Item 3 of Section 1 of the TI Act defines eligible property as: property that is located in Australia: a) buildings (including fixtures) or other structures or works on, in or under land; b) tangible property that is located in, or on, property to which paragraph a) applies; c) any other property described by the regulations. Note: Roads, tunnels, dams and pipelines are examples of eligible property. Section 1 of the Regulations lists exclusions to the scheme and Item 13 excludes a contract of professional indemnity insurance. On this basis, the scheme does not cover medical indemnity insurance.
To what extent is an insurance contract which provides cover to a “public/private partnership” that covers both the government and consortium an eligible insurance contract?
By reason of the Terrorism Insurance Act 2003 and the Regulations made under that Act, a contract of insurance is not an eligible insurance contract to the extent it provides cover to the Crown in the right of a state of territory. Consequently, an insurance contract which provides cover to the Crown, a minister or a department and a private sector entity is not an eligible contract (if it otherwise meets the definition in section 7 of the Act) to the extent it provides cover to the private sector entity.
In an events cancellation policy does an insured have to actually occupy eligible property in order for the contract of insurance to be considered eligible?
Yes. For an events cancellation policy to be an eligible insurance contract under s 7(1)(b)(ii) of the Act, the policy must cover business interruption and consequential loss arising from the inability to use eligible property that is occupied by the insured. The ordinary meaning conveyed by the phrase “eligible property… that is… occupied by the insured” clearly refers to an insured that is in actual possession of the eligible property. The phrase “is not occupied” refers to the present tense (in actual possession) not future tense (will be occupied).
Reinsurance Agreement
Is it compulsory for insurers to reinsure terrorism risk through ARPC?
No. It is not compulsory for insurers to reinsure the risk of eligible terrorism losses through ARPC. However, the TI Act compels all insurers to provide full terrorism cover on eligible policies. Local and foreign insurers have the option to:
- purchase terrorism reinsurance from ARPC;
- purchase terrorism reinsurance from a commercial reinsurer; or
- elect to hold the exposure themselves.
Of course, ARPC offers terrorism reinsurance for all eligible insurance contracts and this can be easily arranged by contacting ARPC at [email protected]au.
Reporting
Do I have to declare all risk locations even if they are in the same postcode?
Yes. This assists with aggregate reporting and, in the event of a Declared Terrorist Incident (DTI), will assist us in claims reporting and auditing.
Do I report contents only risks in aggregate return?
No. If the policy only covers contents, it should not be included in the annual aggregate (post codes) submission unless there is a building attached to it. The contents only risks are excluded.
What elements must be included in the Street Address Detail Aggregate Report, which is due by August 31 each year?
This report requires street address level data for risks located in postcodes 2000, 3000, 4000, 5000, and 6000. As the purpose of this information is to allow accurate exposure modelling in these high-risk areas, the location details are very important (full street address at a minimum, with GNAF or Lat/Long preferred). This level of detail must be provided for all eligible building, contents, and business interruption risks within these postcodes regardless of risk size or policy type (stand-alone contents or business interruption policies should be included).
Retentions
Does the retention figure apply to each and every loss during a retention period or is it an aggregate deductible?
The retention figure noted in ARPC’s treaty Agreement is an annual aggregate retention to be applied during the same retention period.
In cases where a parent insurance company has subsidiary insurance companies can ARPC set one retention for the group?
No. The Treasurer to Australian Reinsurance Pool Corporation’s (Risk Retention) Direction (available here) requires ARPC to apply a separate retention to each individual entity which reinsures with ARPC. The Explanatory Memorandum to the Terrorism Insurance Bill 2003 reinforces that it was the Government’s intention that a separate retention be applied to each individual entity which reinsures with ARPC. Item 1.1 of the Revised Explanatory Memorandum states that the retention will be set “per insurer” and item 3.38 describes the retention for “each insurer that reinsures with the ARPC”.
Disclaimer: The Australian Reinsurance Pool Corporation (“ARPC”) is established by section 9 of The Terrorism Insurance Act 2003 (Cth) (“the Act”). The functions and powers of the ARPC are set out in sections 10 and 11 of the Act. The ARPC’s main function is to provide insurance cover for eligible terrorism losses and the ARPC has power to do all things necessary or convenient to be done for or in connection with the performance of that function. In the performance of that function, the ARPC will enter into discussions with insurers concerning the provision by the ARPC of reinsurance cover for eligible terrorism losses. The ARPC does not hold itself out as providing legal advice to insurers or the public in relation to the interpretation, construction or application of the Act and does not do so. The ARPC provides general information on its website, in its publications and in the course of its dealings with insurers about the Act, the regulations made pursuant to the Act and ARPC’s Reinsurance Agreement for Terrorism Risks. That information does not constitute legal advice. Insurers dealing with or proposing to deal with the ARPC should obtain their own legal advice, if that is considered necessary, for the purpose of making decisions.