Workers Compensation Amendment
(Terrorism Insurance Arrangements)
Bill 2002
Explanatory note
This explanatory note relates to this Bill as introduced into Parliament.

Overview of Bill

The object of this Bill is to provide for a New South Wales workers
compensation terrorism re-insurance scheme.

Outline of provisions

Clause 1 sets out the name (also called the short title) of the proposed Act.

Clause 2 provides for the commencement of the proposed Act on a day or days
to be appointed by proclamation.

Clause 3 is a formal provision giving effect to the amendments to the Workers
Compensation Act 1987 set out in Schedule 1.

Schedule 1 Amendment of Workers Compensation
Act 1987
Schedule 1 inserts proposed Division 8 (proposed sections 239AA–239AL) in
Part 7 (Insurance) of the Workers Compensation Act 1987.

Proposed section 239AA defines certain terms for the purposes of the proposed
Division.

Proposed section 239AB defines act of terrorism for the purposes of the
proposed Division.

Proposed section 239AC defines threshold amount as $1 million for the
purposes of the proposed Division. It also provides that the threshold amount
applies in respect of the total amount of claims referred to in the proposed
Division, and provides for that amount to be apportioned among the insurers
who have a liability in respect of such a claim.

Proposed section 239AD enables the Minister to declare (by order published in
the Government Gazette) that an act of terrorism has given rise to significant
terrorism-related liabilities. However, such a declaration may be made only at
the request of an insurer, and only if the Minister is satisfied that the act of
terrorism occurred after 4pm on 30 June 2002 (or at any time on any day after
that date) and that it has given rise to liabilities for payment by insurers of
amounts that, in total, exceed the threshold amount.

Proposed section 239AE provides for the establishment of a Terrorism Re-insurance
Fund (TRF) on the first occasion that a declaration is made under
proposed section 239AD.

Proposed section 239AF obliges insurers to comply with any requirement of
the WorkCover Authority (the Authority) to provide it with certain information
relating to any liabilities the insurers have incurred (as insurers) in respect of an
act of terrorism that is the subject of a request for a declaration under proposed
section 239AD.

Proposed section 239AG requires the Authority to determine both the total
amount to be paid to the TRF and the amount to be contributed by each insurer
whenever a declaration is made under proposed section 239AD.

The total amount to be paid to the TRF is the amount that the Authority estimates
will be necessary to satisfy all claims in respect of the act of terrorism specified
in the declaration, less the greater of the total of the maximum amounts payable
to insurers under contracts or arrangements for re-insurance in respect of liability
for claims arising from the act of terrorism and the threshold amount.

The amount to be contributed by each insurer is to be calculated in accordance
with the formula specified in the proposed section. The Authority must give each
insurer written notice of the amount due from it and the date by which the
amount must be paid. The notice may (but need not) offset any amount to be
reimbursed to the insurer under proposed section 239AH. Failure to pay in
accordance with the notice constitutes an offence, and the Authority may recover
the money (plus interest at the rate prescribed by the regulations made under the
Act) as a debt.

Proposed section 239AH permits the Authority to make partial
reimbursements, out of the TRF, of the amounts paid by insurers in respect of
claims arising from the act of terrorism specified in a declaration under proposed
section 239AD. A reimbursement may be made only if the insurer applies for it
and the Authority is satisfied that the insurer has, in respect of those claims,
made the payments specified in the application and that the amount to be
reimbursed is no more than the total amount paid by the insurer less the insurer’s
excess (as defined in the proposed section).

Proposed section 239AI permits the Authority to apply all or part of the amount
to be reimbursed to an insurer under proposed section 239AH so as to reduce the
amount of any money due from and unpaid by the insurer under proposed section
239AG (including money by way of interest calculated on the amount originally
demanded under that section). If it does this, the Authority must make any
necessary adjustments and give the insurer written notice of the way in which
the reimbursement (or part of the reimbursement) was applied, any adjustments
that were made, and the amount (if any) that remains due from the insurer after
the application of the reimbursement (or part of the reimbursement).

Proposed section 239AJ provides that, if a reimbursement is made to an insurer,
the Authority is subrogated (to the extent of the reimbursement) to all the rights
and remedies of the insurer against any other person in respect of recovery of the
money paid by the insurer in relation to the relevant claim.

Proposed section 239AK enables regulations under the Act to make provision
for or with respect to the TRF generally and specifies some particular matters
that may be the subject of such regulations (such as the circumstances and
manner in which money standing to the credit of the TRF may be distributed to
insurers otherwise than by way of reimbursement under proposed section
239AH). The proposed section also permits the regulations to exempt any
specified insurer or class of insurers from the operation of all or any of the
provisions of the proposed Division in such circumstances (if any), and subject
to such conditions (if any), as may be specified in the regulations.

Proposed section 239AL provides for a review of the proposed Division to be
conducted (as soon as possible after 30 June 2004) to determine whether the
policy objectives of the proposed Division remain valid and whether the
provisions of the Division remain appropriate for securing those objectives. A
report on the outcome of the review is to be tabled in both Houses of Parliament.

Note: If this Bill is not modified, these Explanatory Notes would reflect the Bill as passed in the House. If the Bill has been amended by Committee, these Explanatory Notes may not necessarily reflect the Bill as passed.

 

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