The Assistant Treasurer, Chris Bowen MP, today announced the appointment of Mr Tom Karp and the reappointment of Mr Geoff Vogt to the Board of the Australian Reinsurance Pool Corporation (ARPC), each for a three-year period from 29 August 2008.
The ARPC administers the Government's terrorism insurance scheme. The scheme provides reinsurance cover for terrorism risk relating to commercial property and infrastructure and was established following the withdrawal of cover after the terrorist attacks in the United States of America on 11 September 2001.
"It is with great pleasure that I announce the appointment of Mr Tom Karp and the reappointment of Mr Geoff Vogt to the ARPC," Mr Bowen said.
Mr Karp is a widely respected and experienced actuary. He held senior roles at the Australian Prudential Regulation Authority, and its predecessor, until his retirement in June 2008. Mr Karp's appointment will further strengthen the ARPC's technical and analytical capacity.
Mr Vogt is the former longstanding Chief Executive Officer of the South Australian Motor Accidents Commission. In addition, Mr Vogt has accounting and finance qualifications and has worked in several senior accounting and finance positions. Mr Vogt has been an ARPC Board member since 2005.
The appointment of these Board members will allow the ARPC to maintain the high level of diligence, skill and experience that it requires to administer the terrorism insurance scheme.
Terrorism Insurance Scheme: Background Information
Why was a terrorism insurance scheme introduced?
- The Australian Government's terrorism insurance scheme was set up in response to the withdrawal of terrorism insurance after the terrorist attacks in the Unites States of America on 11 September 2001.
- In particular, the lack of terrorism cover for commercial property and infrastructure led to concerns that there would be significantly less financing and investment in these sectors, leading to reduced economic growth.
How does the terrorism insurance scheme work?
- The scheme was established through the Terrorism Insurance Act 2003 (TI Act). The scheme provides replacement terrorism insurance cover for commercial property (including infrastructure) and for associated business interruption losses and public liability claims.
- The scheme does not replace terrorism insurance cover in other classes of insurance such as residential property insurance.
- Participation in the scheme is compulsory for all buyers of commercial property insurance and for associated business interruption and public liability insurance.
- The Assistant Treasurer must trigger the scheme if he is satisfied that a terrorist act has occurred in Australia. Triggering the scheme overrides terrorism exclusion clauses in eligible insurance contracts, with the result that insurers will be forced to cover claims.
- In turn, insurers may voluntarily reinsure their additional risk with the Australian Reinsurance Pool Corporation (ARPC), which is established under the TI Act to provide the cover.
- Reinsurance is'insurance for insurers', that is, the passing of all or part of an insurance risk covered by an insurer to another insurer in return for the payment of a premium.
- The scheme was established with the intention that it be a temporary measure that would be wound up when commercial insurers re-entered the terrorism insurance market.
- A review of the TI Act was conducted in 2006. It was determined at that time that commercial capacity was inadequate to meet Australia's needs, although commercial capacity had increased since 2003.
Operation of the ARPC
- The ARPC provides terrorism reinsurance under the scheme. The ARPC has a seven person Board, a Chief Executive Officer and staff based in Canberra and Sydney. The ARPC's key activities include:
- managing systems to issue reinsurance and to efficiently pay claims if the scheme is triggered; and
- overseeing the management of the scheme's assets and investments.