Home / Regulatory & Government / Cyclone expertise proposed for ARPC board
13 December 2021
The Australian Reinsurance Pool Corporation (ARPC) should appoint a board member familiar with insurance issues facing residents in cyclone-prone areas if a proposed extension of its responsibilities goes ahead, a Triennial review has recommended.
ARPC is set to administer a cyclone reinsurance pool for Northern Australia from next July if legislation passes Federal Parliament next year, adding to its current role in providing terrorism reinsurance.
The review says the board would benefit from adding someone familiar with affordability issues in cyclone-prone regions, claims processes and mitigation. The person should also be well placed to help foster relationships with consumers, brokers and the insurance industry.
“Unlike the current terrorism pool, the cyclone pool is expected to pay substantial and more frequent claims,” the review says.
“While as a reinsurer the ARPC will not handle claims at a policyholder level; it is the responsible entity for a significant intervention in the Australian reinsurance market, and there is strong community expectations and interest in the scheme.”
Two board observers, one from the Australian Prudential Regulation Authority and another, such as the Australian Government Actuary, should also be appointed on a temporary basis to help ensure a smooth implementation of the cyclone scheme, it says.
The triennial review of the Terrorism Insurance Act 2003 rejected extending the terrorism scheme to include cyber attack property damage.
“This review does not consider the current exclusion of computer crimes as producing a market failure that warrants intervention through the ARPC,” it said. “However, there is potential for terrorist groups to develop greater capabilities in the longer term, which could change this assessment in a future review.”
The Terrorism Insurance Act 2003, introduced after the September 11 attacks caused the withdrawal of commercial cover, was intended to be a temporary measure and is regularly reviewed to see if it is still needed.
The latest report says there is still no viable alternative for insurers seeking terrorism cover at commercially reasonable prices and recommends the interval between reviews should be increased from three years to five.
“Any substantial growth in private market capacity is likely to take significantly longer time than the current interval between reviews,” it says.