13 September 2012
Mr Claudio Damiani
Financial Systems Division
Treasury
Re: Terrorism Insurance Cover for mixed use and High Value Residential Buildings under the Terrorism Insurance Scheme
The Owners Corporation Network (OCN) supports moves to include mixed use and residential apartment buildings in the Terrorism Insurance Scheme.
1. Currently no terrorism cover of substance is available to residential apartment buildings where the insured property value exceeds $50 million. Strata insurance and ISR policies will not offer terrorism cover to buildings valued in excess of $50 million.
Discussions by specialist strata insurance brokers on behalf of Owners Corporations have been unsuccessful in obtaining any such cover in the Australian market, and brokers have indicated any cover on the London Market would cost around .3% of the insured value, which in effect would double the premium cost of property cover and is unaffordable.
2. As it is now 10 years since the inception of ARPC terrorism cover and no viable commercial cover is available to high end residential apartment buildings, there is no reason to believe such a cover would now emerge.
3. OCN does not foresee any unintended consequences of allowing such residential and mixed use apartment buildings into the scheme.
4. OCN expects that insurance premiums for residents of mixed use and high value residential buildings would rise by the cost of the levy and a small administration charge by the underwriters.
As high end residential apartment buildings frequently have substantial security such as restricted entry, CCTV cameras, Concierge monitored entrances, on site building management and security personnel, access by terrorists is more difficult. OCN’s position is that the terrorism levy for these buildings should be less than the current 12%, 8% and 4% as levied on commercial buildings.
OCN suggests residential and predominately residential apartment buildings should pay 6%, 4% and 2%.
5. OCN does not expect a significant impact on the size of the scheme if mixed use and high end residential buildings become eligible to be covered under the scheme, especially if it is limited to buildings over $50 million of insured assets which is the category currently not catered for by the commercial market in Australia.
6. If the proposal goes ahead, OCN suggests that it should commence as soon as possible, and no later than 1 January 2013.
Owners Corporation Network Ltd.
Gerald Chia
Director, Secretary
encl:
OCN background
Examples of Sydney high end mixed use residential apartment buildings currently not able to obtain insurance cover for terrorism related events
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