The Federal Government has released a draft Terrorism Insurance Amendment Regulations 2017 for consultation. The draft regulation implements recommendation nine of the Terrorism Insurance Act Review 2015. The recommendation suggested extending the terrorism insurance scheme to apply to mixed-use buildings where at least 20 per cent of the floor space is used for commercial purposes and also to high value residential buildings that are insured for at least $50 million.
The Terrorism Insurance Act 2003 (Cth) was originally established to override terrorism exclusion clauses in eligible insurances contracts that opt to exclude losses arising from declared terrorist incidents. The scheme was established after the events of September 11 in the United States as there was insufficient terrorism insurance cover available in the market place for commercial buildings. The scheme is reviewed every three years and in 2015, the review acknowledged that the scheme should extend to mixed-use buildings as well as high value residential buildings.
The Terrorism Insurance Regulation 2003 currently excludes a number of insurance contracts from the scheme. At present, home buildings as well as any content found in home buildings are excluded from the scheme. Consequently, buildings that are primarily used as a place of evidence are not afforded the coverage of the scheme.
The amendment Regulation replaces the relevant clauses in the Regulation with a new provision that only excludes from the scheme a contract of insurance that provides cover for a building and its contents if more than 80% of the building’s floor space is used for residential purposes, and it is insured for less than $50 million.
Submissions on the draft Regulation close on 13 February 2017.
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