Australia’s Terrorism Reinsurance Pool (TRP), managed by the Australian Reinsurance Pool Corporation (ARPC), is a government-backed initiative designed to ensure that insurers can continue to offer terrorism cover – even when private reinsurers might be unwilling to take on the risk.
This article traverses the function of the TRP; what businesses and assets are covered under the TRP; and additional risk transfer options available for businesses that seek broader coverage for violent events which are not deemed a ‘Declared Terrorist Incident’.
What is the Terrorism Reinsurance Pool?
Established under the Terrorism Insurance Act 2003, the pool was created in response to the global insurance market withdrawing terrorism coverage after the 9/11 attacks. The purpose of the TRP is to allow insurers to reinsure eligible terrorism losses through the ARPC, ensuring that claims from declared terrorist incidents are covered.
The pool itself is backed by a Commonwealth guarantee, with a total capacity of around $14B.
The pool covers ‘eligible property’ – what does this mean?
The TRP initially focused on commercial properties, however, since its inception, the scheme has expanded to include:
- Mixed-use strata buildings with greater than 20% commercial space.
- Residential strata buildings with a Building Sum Insured (BSI) greater than $50M with residential schemes with multiple buildings and a combined BSI Greater than $50M still able to secure cover under special terrorism policies if not eligible under ARPC.
That said, there still remains a gap for those commercial assets that do not exceed these thresholds.
Coverage for eligible property extends to include acts involving chemical, biological, or radiological hazards.
The Terrorism Levy
To fund the TRP, insurers collect a terrorism levy from policyholders with the levy rate being linked to both risk and population density which is specified by postcode. For example, commercial properties will attract the following rates:
- Capital cities (population > 1 million) – attract a rate of 16%
- Urban areas (population > 100,000) – attract a rate of 5.3%
- Rural and other areas – attract a rate of 2.6%
This setup ensures that Australians—especially those in high-density or high-value areas—aren’t left exposed in the event of a terrorist attack and is a fascinating blend of public-private risk sharing.
The levy is applied to eligible insurance contracts and will usually show as a separate line item on insurance schedules for transparency.
Claims under the TRP
Since its establishment in 2003, the ARPC has only been triggered once for a declared terrorist incident, the Lindt Café Siege in December 2014.
In this case, a gunman held hostages inside the Lindt Chocolate Café in Martin Place, Sydney, resulting in a prolonged siege and tragic loss of life. The incident was deemed to be a Declared Terrorist Incident (DTI) for the purposes of a claim under the TRP following a declaration by Australian Government under the Terrorism Insurance Act 2003.
Although claims were made by policyholders, no payments were made from the ARPC pool as the insurers involved were able to cover the losses within their own retention thresholds.
Why so few claims?
The ARPC scheme is designed as a backstop, meaning it only pays out after insurers exhaust their own resources.
Furthermore, for the pool to respond, a terrorist event must be formally announced as a DTI by the responsible Minister, in consultation with the Attorney-General. As such, many incidents, while serious, may not meet the criteria for declaration or any claims may be absorbed by insurers without needing ARPC support.
Whilst the ARPC has stood ready with billions of dollars in capacity, its role has largely been preventative and stabilising, ensuring confidence in the insurance market rather than frequently paying out claims.
What ARPC covers
The ARPC steps in when a DTI is announced by the government. Coverage includes:
- Commercial property damage caused by terrorism
- Business interruption losses resulting from terrorism
- Mixed-use buildings (e.g., residential/commercial strata) if they meet eligibility criteria
- High-value residential properties (above a certain threshold)
- Farms with business interruption insurance
- Infrastructure assets such as airports, utilities, and transport hubs
- Construction projects under eligible insurance contracts.
Once a DTI is declared, insurers must ignore terrorism exclusions in eligible policies and pay claims according to their policy terms.
What ARPC does not cover
Certain risks and property types are excluded from the TRP leaving certain assets exposed:
- Residential property (unless it’s part of a mixed-use or high-value building)
- Residential Strata for buildings with less than a $50M sum insured
- Commercial Strata with less than 20% commercial use
- Loss or liability from nuclear fuel, material, or waste
- Life insurance and health insurance
- Motor vehicle insurance
- Marine cargo and hull insurance
- Workers’ compensation
- Small business marine property insurance (excluded from cyclone pool, and generally not covered under terrorism pool either).
Specialist insurance coverage for violent events
Assets and businesses not covered by the TRP can still obtain coverage under products such as an Active Assailant or Crisis policy. These policies cover a range of financial costs and support services for businesses following a violent event, including property damage, business interruption, legal liability, and crisis management. This specialised insurance can provide funds for forensic cleanup, public relations, medical care, and security upgrades, in addition to helping with the financial recovery and operational continuity of the business.
Businesses which are covered under the TRP may also consider this additional coverage for insurable violent events which fall outside the confined circumstances of a ‘Declared Terrorism Incident’.
Bellrock Advisory work with a number of insurers who can provide bespoke solutions, giving comfort that your insurance programme will respond when it matters most. Contact a Bellrock Advisor today.
