The Australian Amusement, Leisure and Recreation Association’s (AALARA) plan for a discretionary mutual fund offers the “only suitable” answer to the industry’s pressing insurance challenges around affordability and availability, the Australian Small Business and Family Enterprise Ombudsman has concluded.

The Ombudsman released today his final report on the public liability insurance crisis facing the industry, more than a month after its interim findings were made public for consultation with stakeholders.

In its interim report, which also looked at the AALARA proposal, the Ombudsman gave preliminary backing for a discretionary mutual fund.

The final report says operating a discretionary mutual fund is not easy as it requires exceptional governance practices, including ensuring an appropriate balance of member representation with independent directors and specialist expertise.

“But the show, as we know it, is on the brink of being a thing of the past,” Ombudsman Bruce Billson said in the report’s foreword.

“Despite the challenges of the proposal, my office recommends [AALARA’s] proposal to establish a [discretionary mutual fund] is the only suitable solution to the critical and immediate need for risk protection in the sector.

“Without a [discretionary mutual fund], there is a real possibility the show cannot go on.”

The Ombudsman says a mutual is not a “silver bullet” to the industry’s insurance problems, pointing out such a scheme will require an ongoing sector-wide commitment to best practice risk mitigation measures and the likelihood of high excesses compared to those previously paid as actuarial modelling has shown.

Success hinges also on ensuring the mutual’s membership remains cohesive and acts in the best interests of other members and support for legislative reform at state and territory levels including willingness to accept the solutions of councils, land and showground managers.

“A [discretionary mutual fund] requires legislative reform by all states and territories to ensure it is accepted in lieu of insurance for licensing requirements,” Mr Billson said.

“Additionally, the [fund] needs to be recognised as a suitable solution at a local level and supported by councils and showground managers.”

AALARA responded to the report, saying it endorses its position that a discretionary mutual fund provides the best strategic solution for the industry.

“While we recognise that a lot of work remains, the report is very encouraging and we look forward to delivering on our commitment to members who have suffered so much over the last 18 months,” President Shane McGrath told insuranceNEWS.com.au.

“As an industry we are made up of so many small business that support Australia’s visitor economy, we employ thousands, entertain millions and mean so much to so many. The show must go on.”

Click here for more from the report.