Huge Covid bill for NSW’s Treasury Managed Fund insurance scheme

Up to $343m in pandemic-linked claims on the NSW’s Treasury Managed Fund have added to the financial pressure on the state.

The Sydney Opera House is among the agencies to submit an insurance claim to NSW’s Treasury Managed Fund, which has no pandemic exclusions in the coverage offered to NSW government agencies and no upper limit on claims. Picture: Jeremy Piper

Up to $343m in pandemic-linked claims on the NSW’s Treasury Managed Fund have added to the financial pressure even after the Berejiklian government was forced to inject $2bn in funds into the state insurer this year.

The expected payouts come after an expensive summer for the fund, with claims related to bushfires topping $507m, according to a NSW Auditor General report.

The Treasury Managed Fund is the NSW government’s main self-insurance scheme, providing coverage of insurable assets and exposures of most government agencies, including galleries and venues such as the Opera House and the SCG.

Many insurers do not cover pandemics due to the size and scope of claims that can arise.

But the Treasury Managed Fund has paid out more than $71m in business interruption claims to NSW state agencies since the start of the pandemic.

Total payments for business interruption and event cancellation exploded from $37m by 30 June to $71m by November 13.

The Insurance Council of Australia is appealing a shock judgment from the NSW Court of Appeal that opened the way to significant claims from tens of thousands of small businesses with policies that refer to the defunct quarantine act.

However, many more businesses holding policies that refer to the current biosecurity act are precluded from making claims for business interruption insurance.

The Treasury Managed Fund has no pandemic exclusions in the coverage offered to NSW government agencies and no upper limit on claims.

The Sydney Cricket Ground Trust has sought $29.5m to cover lost revenues from cancelled sporting events.

The Sydney Opera House also submitted a claim, but declined to provide details.

Sydney Olympic Park Authority, Taronga Conservation Society Australia, and Water NSW lodged insurance claims of $70m, $10m, $23.4m and $5.4m respectively during 2019-20 for costs arising from bushfires and COVID-19.

Payouts from the fund’s statement of cover were triggered by public health orders issued by the NSW government early in the pandemic as well as restrictions on travel imposed by the federal government.

The NSW Department of Planning, Industry and Environment notes further claims relating to COVID-19 are expected to be made while restrictions are still in force.

The NSW Port Authority made $5m in claims after its income was slashed by the pandemic and bans on cruise ships.

A NSW Port Authority spokeswoman said the claims were “primarily related to loss of cruise income” and would continue after the federal government extended the ban until 17 March 2021.

The Port Authority is currently awaiting the assessment of another claim against the Treasury Managed Fund.

The Treasury Managed Fund is currently valued at around $9.43bn, but this only comes after the NSW government tipped another $2 billion into the fund in June after a major crash in investments in March.

Returns to the fund collapsed from $706m in 2019 to only $45m in 2020.

The fund has faced major challenges in recent years with growing claims and falling yields on the back of ultra-low interest rates.