Insurers called to strengthen terrorism insurance
By Justin Lim
The Federal Government has urged the insurance industry not to forget the threat of terrorism and to take a bigger role in producing policies to protect against a terrorist attack.
The Australian Reinsurance Pool Corporation (ARPC) was established under the Terrorism Insurance Act in 2003 and provides reinsurance for replacement terrorism insurance coverage for commercial property and business interruption.
ARPC chief executive officer Neil Weeks said over the past decade terrorism has had a huge impact on the insurance business, with many insurers and reinsurers withdrawing terrorism cover following the September 11 attacks.
Weeks said it is essential the insurance industry did not forget about the threat of terrorism, but instead prepared for the possibility of an attack.
“The threat of terrorism is something everyone needs a constant reminder of,” he said.
“Could it happen in Australia? Yes, the potential is there. To date, four people have already been convicted on charges of terrorism related offences in Australia and there are currently a number of defendants before the courts.”
According to Weeks, while the reinsurance industry has come to accept the ARPC scheme, he hoped reinsurers would begin to actively provide the cover to policyholders rather than relying on the ARPC.
“We prefer to see the industry actively retaining the risk themselves to produce and integrate appropriate insurance policies that abide by the current legislative framework,” he said.
“With some of the composite policies, rather than reinsuring with us, we have seen some insurers retaining the risk on smaller losses themselves, such as risk on plate glass windows.”
Weeks said it was important for insurers to develop adequate protection solutions and promote the importance of terrorism insurance to customers without burying themselves in huge piles of paperwork and impossible policies.
“It’s the businesses themselves that need reminding that terrorism is an ever-present threat. The best way for insurers to do this is to provide risk management advice to their clients. This can be achieved by showing businesses what particular risks they may be exposed to,” Weeks said.
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