The Federal Government’s Terrorism Insurance Bill probably isn’t the best solution to the terrorism cover problem, and it will mean yet another levy on premiums. Alternative schemes are available, but the Government is sailing on anyway, with the Bill expected to become law later this year. But there are still plenty of important questions that need answers.

Quentin Lanyon-Owen, the head of law firm Hunt & Hunt’s insurance practice in Brisbane, said yesterday he has “serious reservations” about the Bill.

“It needs careful study by lawmakers, insurers, government bodies and major corporations before becoming law,” he said. “One primary concern is that the Bill appears so technical, wordy and complicated and is considerably different in terminology from the terrorism offence provisions contained in Section 72.3 of the Criminal Code Act 1995. 

“I am also concerned that in some cases the Bill compels insurers to provide cover for acts of terrorism even though their policies deliberately and specifically exclude such cover.”

This provision will be made possible by the Commonwealth creating the Australian Reinsurance Pool Corporation whose sole job will be to “reimburse” insurance companies for terrorism claims up to $10 billion.

“It is quite possible that $10 billion would not cover the losses that could be expected if a devastating terror attack occurred in the central business district of a major Australian city,” Mr Lanyon-Owen said. “Earlier this month, it was estimated that claims totalling more than $100 billion had already been paid in relation to the September 11 attack on New York. It would be interesting to know what actuarial calculations led the Australian Government to arrive at its figure of $10 billion.”

“Insurers need to determine if they are going to be happy with the mechanism which will require them to investigate, quantify, process and pay such claims before being able to seek reimbursement.”