EXPLANATORY STATEMENT
Issued by authority of the Treasurer
Terrorism Insurance Act 2003
Treasurer to Australian Reinsurance Pool Corporation (Payments to the Commonwealth) Amendment Direction 2014
Section 38 of the Terrorism Insurance Act 2003 provides for the responsible Minister to give written directions to the Australian Reinsurance Pool Corporation (ARPC), including directions requiring it to pay money to the Commonwealth.
The Minister to Australian Reinsurance Pool Corporation (Payments to the Commonwealth) Direction 2012 directed the ARPC to make the following payments to the Commonwealth:
a one-off payment of $100 million to be made in January 2013;
a payment of $75 million to be made in January 2013;
a payment of $75 million to be made in January 2014;
a payment of $75 million to be made in January 2015; and
a payment of $75 million to be made in January 2016.
The first three payments have been made. The payments scheduled for January 2015 and January 2016 have not yet been made.
The 2014-15 Budget measure Australian Reinsurance Pool Corporation – assess future options specified that the ARPC is to pay the Government a fee totalling $450.0 million over four years for the $10.0 billion guarantee provided by the Government to the ARPC. The fee will replace the current requirement for the ARPC to provide a dividend to the Government.
Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.
This Direction amends the Minister to Australian Reinsurance Pool Corporation (Payments to the Commonwealth) Direction 2012 in order to cancel the requirement for the ARPC to pay the Commonwealth a $75 million payment in January 2015 and a $75 million payment in January 2016.
A separate Direction will be issued in the 2014-15 financial year directing the ARPC to make payments to the Government as compensation for the $10.0 billion guarantee.
Consultation on the original scope of the dividend to be paid to the Commonwealth by the ARPC was first considered as part of the 2012 Review of the Terrorism Insurance Act 2003.
No further consultation was undertaken for this Direction. As this Direction is of a minor or machinery nature, and as it gives effect, in terms announced in the Budget, to a decision to revoke an obligation, section 18 of the Legislative Instruments Act 2003 provides that consultation is not required.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
The Treasurer to Australian Reinsurance Pool Corporation (Payments to the Commonwealth) Amendment Direction 2014 is a Direction made under section 38 of the Terrorism Insurance Act 2003.
Human rights implications
This Legislative Instrument does not engage any of the applicable rights or freedoms.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
Overview
The Terrorism Insurance Act 2003 was enacted to address the financial and economic impacts of terrorism in Australia by providing a government-backed insurance scheme to support businesses and the broader economy. This Act was introduced by the Parliament of Australia and its primary policy objective is to mitigate the risk of significant economic disruption in the event of a terrorist attack by ensuring that the insurance industry remains solvent and capable of providing coverage. The Act established the Australian Reinsurance Pool Corporation (ARPC) to offer reinsurance to insurance companies, thereby spreading the financial risk associated with terrorist acts. The Treasurer to Australian Reinsurance Pool Corporation (Payments to the Commonwealth) Amendment Direction 2014 modifies the existing directive concerning payments to the Commonwealth from the ARPC. It specifically cancels the scheduled payments of $75 million for January 2015 and January 2016, aligning with the 2014-15 Budget measure that introduces a new fee structure for the $10 billion government guarantee to the ARPC, which will replace the previous dividend payments. This amendment is consistent with human rights as it does not engage any applicable rights or freedoms.
Scope and Application
The Treasurer to Australian Reinsurance Pool Corporation (Payments to the Commonwealth) Amendment Direction 2014 amends the Minister to Australian Reinsurance Pool Corporation (Payments to the Commonwealth) Direction 2012, which was issued under section 38 of the Terrorism Insurance Act 2003. The amendment specifically cancels the requirement for the Australian Reinsurance Pool Corporation (ARPC) to make payments of $75 million to the Commonwealth in January 2015 and January 2016. This Direction applies to the ARPC, an entity established under the Terrorism Insurance Act 2003 to provide reinsurance for terrorism-related risks, and is intended to reflect a policy decision regarding the compensation for the $10 billion guarantee provided by the Government to the ARPC. The Direction applies nationally, given the federal nature of the terrorism insurance scheme and the involvement of the Commonwealth in its administration. There are no exclusions or exemptions specified within this Direction, and it operates within the existing framework of the Terrorism Insurance Act 2003.
Key Provisions
The Terrorism Insurance Act 2003 (TIA) provides the legal framework for the Australian Reinsurance Pool Corporation (ARPC), and includes provisions for the responsible Minister to issue directions to the ARPC (section 38). Specifically, the Minister to Australian Reinsurance Pool Corporation (Payments to the Commonwealth) Direction 2012 required the ARPC to make a series of payments to the Commonwealth, with the final two payments scheduled for January 2015 and January 2016, respectively (section 3). However, the Treasurer to Australian Reinsurance Pool Corporation (Payments to the Commonwealth) Amendment Direction 2014 amends the 2012 Direction by cancelling these two payments (section 4). Instead, the ARPC will make a single fee payment of $450 million over four years, as compensation for the $10 billion guarantee provided by the Commonwealth (section 4).
This Direction places certain obligations on the ARPC. Specifically, it requires the ARPC to cease the scheduled payments of $75 million each in January 2015 and January 2016, and instead to make a single fee payment of $450 million over four years (section 4). The Direction also notes that a separate Direction will be issued in the 2014-15 financial year to detail the exact terms and conditions of this fee payment (section 4).
There are no specific offences, penalties, or civil/criminal consequences outlined in the Direction for non-compliance with the requirements. However, the Direction does note that it is of a minor or machinery nature, and that it gives effect to a decision to revoke an obligation (section 6). As such, section 18 of the Legislative Instruments Act 2003 provides that consultation is not required. Furthermore, the Direction is compatible with human rights as it does not engage any of the applicable rights or freedoms (section 8).