The $1.2 trillion strata property sector is calling on the federal government to urgently review how some of the biggest residential communities and mixed use buildings in Queensland are insured against acts of terrorism.
The peak body for this sector is concerned that thousands of properties will be on their own in dealing with the financial scars of terrorism, unless urgent action is taken to update the Australian Reinsurance Pool Corporation (ARPC).
The ARPC is a statutory authority established by the Terrorism Insurance Act 2003 to administer the terrorism reinsurance scheme, providing primary insurers with reinsurance for commercial property and associated business interruption losses arising from a declared terrorist incident.
26 percent of the population (6.2 million) now live in the apartments, units and townhouses of the strata sector and Strata Community Australia CEO Kim Henshaw says only a fraction of this growing community will be financially protected if key requirements of the ARPC are allowed to stay the way they are.
“The ARPC’s requirements to qualify for insurance cover no longer appropriately respond to the property market that we have in Australia.”
“The glaring observation we’ve made is that large residential and mixed-use properties are at a distinct disadvantage to both small residential or any size commercial properties when it comes to accessing terrorism insurance, and that’s a serious systematic failure.”
“As it currently stands, mixed-use high rise buildings with between 20-50% of the floor space devoted to commercial use do not benefit from cover offered by the market or that of the ARPC.”
Mr Henshaw says mixed-use properties are becoming more and more popular as developers and architects try to cater for a market wanting more, and the ARPC must in turn adapt.
“Many high rise residential developments on the market now are commercially designed, with cafes, restaurants, newsagents, and retail shopfronts built into the ground levels, and these properties will be at risk of not being covered.”
“Take the Lindt Cafe in Martin Place for example; the federal government declared the December 2014 siege a “terrorist incident” meaning that insurers could draw on the ARPC to cover policy holders, but only commercial losses were paid out.”
“If a similar incident was to repeat, only affecting mixed-use buildings outside of the ARPC’s scope there would be no support mechanism in place to help property owners and local residents get back on their feet.”
Mr Henshaw says a review of the ARPC was scheduled to happen in 2015, but as that December has ticked around, any hope of that taking place has vanished.
“The ARPC is scheduled for a review every three years, and with the last one being in 2012, we were hoping that 2015 would tick off some much needed updates, but we’re in December now and that’s not looking likely.”
“Too much has changed in the world recently for us to go another year without change, so we urge the Federal Government to prioritise this action immediately.”
Mr Henshaw hopes the shocking events occurring overseas in some of the world’s biggest cities serve as a wakeup call for the federal government to schedule a review.
“On the back of the Paris attacks, it’s pretty clear that large metropolitan areas are those at the greatest risk, so we encourage swift action from the Government, to protect the biggest property sector in Australian CBD’s.”
“The Australian Security Intelligence Organisation (ASIO) recently created a new terror alert system to respond to this worsening issue, so there’s no doubt in our mind that this should be an immediate priority.
Mr Henshaw says the nature of these reviews could mean it will be many months until property owners see some change, so they’re being encouraged to stay proactive.