The Federal Government will provide terrorism cover for buildings and infrastructure in a bid to ease the string of problems that followed the global insurance industry’s exit from the field following September 11.

Federal Treasurer Peter Costello announced the Government would provide insurance for losses above the level of cover available in the market. Basically, it’s making itself a last resort for insurers who have already exhausted all of the options available to them.

Mr Costello has been careful to point out that the Government will not be providing long-term terrorism insurance cover. “The Government does not want to stand in the way of the revival of the insurance market in this area,” he said. Nevertheless, the Government might be acting as an insurer for a long time.

The short-term provision of terrorism cover will help property developers and other businesses in the property market. The lack of insurers willing to provide terrorism cover has caused problems, with lenders refusing to finance new projects.

Property Council of Australia CEO Peter Verwer was relieved. “Clearly, the Treasurer and Cabinet understand the issues and their importance,” he said. “There is about $80 billion worth of commercial property uninsured at the moment, and you can easily double that amount in infrastructure.”