This section includes General FAQs on Terrorism Reinsurance Pool (terrorism pool) coverage.
This section includes General FAQs on Terrorism Reinsurance Pool (terrorism pool) coverage.
No. ARPC terrorism reinsurance premiums are calculated based on the tier rate for the physical location of the risk, not the post office box address. The postcode assigned to the street address of the insured property must be ascertained to determine the appropriate tier and accurately calculate the terrorism reinsurance premium. Postcodes assigned to post office box locations are not to be used.
Railways and pipelines can traverse many areas and it is difficult to accurately determine the premium income applicable to the various ARPC tiers. We recommend that insurers the tier locations of those assets and calculate the premium according to those tiers. We do not expect insurers to trace every kilometre of track or pipeline. Note that the terrorism reinsurance premium is applicable to the whole of the eligible premium income, including that of pipelines, tracks, and structures.
ARPC’s quarterly account template requires a split of premium into tier and State. Consequently, it is important to ensure that the actual risk location is used when recording data on your accounting system. Relatively few postcodes straddle State boundaries. However, special care should be taken when such postcodes arise to ensure the risk location is recorded in the correct State. Insurers are to use only the boundaries specified by Australia Post.
ARPC terrorism tier rates are to be applied to the insured’s estimate of contracts which will commence during the annual construction policy period. We do not require insurers to adjust the initial reinsurance premium upon receipt of the 12-month declaration. Insurers should calculate the applicable reinsurance premium based on estimates of the total contract values in each of the three tiers. ARPC will accept reinsurance premium calculated on the location(s) where the maximum value of the work is intended to be commenced during the 12-month policy period. The insured’s estimate of contract values may also be used as the basis for figures submitted in the contract works section of the annual aggregate report.
Insurers have the option to show terrorism premium as a separate item, because the amount paid by the insured to the insurer is decided by the insurer, not ARPC. However, the amount paid by the insurer to ARPC is to be calculated by multiplying the appropriate tier rate to the premium income processed by the insurer each quarter.
Terrorism reinsurance premiums are payable on all excess of loss premium that provides cover for eligible property. If there are no eligible risks with values that reach the layer on which the insurer participates, no eligible reinsurance premium would be payable to ARPC. However, if the sum insured of eligible risks does reach the subject excess of loss layer, reinsurance premium would be payable to ARPC by applying tier rates to the premium income for that layer.
The terrorism reinsurance premium due to ARPC by the insurer is calculated by applying the relevant reinsurance premium Tier rates to the ‘Premium Income’ as defined in clause 9 of the ARPC Reinsurance Agreement for Terrorism Risks. ARPC is then paid the appropriate terrorism reinsurance premium. This means that, if an insurer knows the premium they require to insure the risk, the insurer may wish to ‘gross up’ the required risk premium by the relevant Tier percentage before applying the ARPC Tier rate.
Example of grossing up the risk premium required by the insurer:
The insurer requires $10,000 to cover a risk located in Tier A that attracts 16% terrorism reinsurance premium.
How to 'gross up' the premium required by the insurer
| Premium required by the insurer | $10,000 |
| Gross up factor for Tier A (1/(1-16%)) | x 1.190476 |
| Grossed up 'Premium Income' charged on the policy | $11,904.76 |
| Less ARPC reinsurance premium at 16% of Premium Income | $1,904.76 |
| Balance of premium remaining for insurer | $10,000 |
However, if the insurer does not ‘gross up’ the required risk premium, the insurer will be left with less than the required risk premium after the terrorism reinsurance premium is calculated and paid to ARPC.
If not 'grossed up' i.e. just adding 16% to the premium
| Premium required by the insurer | $10,000 |
| Plus 16% for the Tier A location | $1,600 |
| 'Premium Income' including $1600 allowance for Tier rate | $11,600 |
| Less ARPC reinsurance premium at 16% of Premium Income | $1,856 |
| Balance of premium remaining for insurer | $9,744 |
Definition of ‘Premium Income’ (originally referred to as Gross Base Premium)
Clause 9 of the ARPC Reinsurance Agreement for Terrorism Risks defines Premium Income as:
without any deduction for commissions, reinsurance expenses, bank fees, Australian Non-Resident Insurer Tax or any Foreign Withholding Taxes payable to a non-Australian authority, but less the amount of:
Please note that Foreign Withholding Tax (as distinct from Australian Non-Resident Insurer Tax) must not be deducted from Premium Income but can be deducted from Reinsurance Premium due to ARPC as stated in clause 20.5 of the agreement.
The insurer may deduct any Foreign Withholding Tax remitted to a non-Australian authority from the Reinsurance Premium due to ARPC to the extent such amounts are required to be remitted pursuant to the application of any non-Australian law applicable to the insurer.
Ultimately, it is up to the insurer to determine how the premiums, commissions and any other charges are calculated.
ARPC does not hold itself out as providing legal or other advice to insurers, the public or anyone else in relation to the interpretation, construction or application of the Act or regulations made under the Act or the reinsurance cover provided by the ARPC, and does not do so. Insurers and their representatives should obtain their own legal and other professional advice, including tax advice, for the purposes of making decisions and otherwise on any matter in connection with the Terrorism and Cyclone Insurance Act 2003 (Cth).
Rolling stock is excluded from the terrorism pool under Item 26 of Schedule 1 of the Terrorism and Cyclone Insurance Regulations 2003 (the Regulations). Trains, trams, or other railway vehicles may be covered in the course of manufacture, however, as soon as the vehicle is operated or used on a railway track, it is considered ‘rolling stock’ and is excluded from the terrorism pool.
The existence of an overarching global terrorism insurance policy does not affect the eligibility of a separate contract of insurance issued by another insurer, such as a local insurer. If the insured has purchased insurance that is eligible under the TCI Act, even though they may also have a global policy that provides full cover for terrorism, the insurer that issued the eligible policy will still be required to pay ARPC the appropriate terrorism reinsurance premium if they have a reinsurance agreement with ARPC.
Yes. An exclusion or exception (however described) for:
is considered to be a terrorism exclusion clause under the TCI Act and will be rendered ineffective in the event of a Declared Terrorism Incident. Therefore, 'acts of terrorism involving biological, chemical, pollution or contamination' materials are covered by the scheme.
No. A sub-limit does not render a contract of insurance ineligible. Sub-limits fall under the definition of an ‘exclusion or exception (however described)’ within the meaning of s 8(2) of the TCI Act. As such, a sub-limit for terrorism cover in an ‘eligible insurance contract’ will have no effect in relation to a loss or liability to the extent to which the loss or liability is an eligible terrorism loss under the TCI Act. Full terrorism reinsurance premium is payable to ARPC by insurers who have a reinsurance agreement with ARPC and issue policies that sub-limit cover for terrorism losses.
Schedule 1, Item 18(a) of the Regulations refers to the types of contracts of insurance which are not eligible insurance contracts for the purposes of the TCI Act. Item 18 (a) excludes a contract of insurance for a motor vehicle (other than movable machinery or equipment, used in mining or construction activities, that would not ordinarily be registered to travel by road). Consequently, the eligibility of contracts of insurance covering forklifts and other movable machinery or equipment will depend on whether or not the assets are ‘movable machinery or equipment, used in the mining or construction activities, that would not ordinarily be registered to travel by road.’
No. Reinsurance contracts are not eligible under Item 7 of Section 7 of the TCI Act.
Under the TCI Act and Item 8 of Schedule 1 of the Regulations, a contract of insurance is not an eligible insurance contract to the extent that it provides cover to:
Consequently, an insurance contract which provides cover to the Crown, a Minister or a Department of a State or Territory and a commercial entity is not an eligible contract of insurance (if it otherwise meets the definition in section 7 of the TCI Act) to the extent it provides cover to the Crown, a Minister or a Department of a State or Territory.
Item 8 does not affect the eligibility of such a contract of insurance to the extent that it covers a commercial entity, and terrorism reinsurance premium would be payable on that component of the policy.
For an Event Cancellation policy to be an eligible insurance contract under s 7(1)(b)(ii) of the TCI Act, the policy must cover business interruption and consequential loss arising from the inability to use eligible property that is occupied by the insured. The ordinary meaning conveyed by the phrase “eligible property… that is… occupied by the insured” refers to an insured that is in actual possession of the eligible property. The phrase “is occupied” refers to the present tense (in actual possession) not future tense (will be occupied).
No. It is not compulsory for insurers to reinsure the risk of eligible terrorism losses through ARPC. However, it is important to note that the TCI Act compels all Australian and foreign insurers to provide full terrorism cover on eligible contracts of insurance by making terrorism exclusion clauses ineffective in eligible contracts of insurance. The effect of the TCI Act applies regardless of whether or not the insurer has purchased ARPC terrorism reinsurance coverage. Local and foreign insurers have the option to:
purchase terrorism reinsurance from ARPC;
purchase terrorism reinsurance from a commercial reinsurer; or
elect to hold the exposure themselves.
Once an insurer has entered into a reinsurance agreement with ARPC, they must reinsure all eligible insurance contracts with ARPC.
ARPC offers terrorism reinsurance for all eligible insurance contracts, and this can be easily arranged by contacting ARPC at [email protected].
Yes. This assists with terrorism exposure aggregate reporting and, in the event of a Declared Terrorist Incident (DTI), will assist ARPC in claims reporting and auditing.
No. If the policy only covers contents, it should not be included in the terrorism annual aggregate (postcodes) report.
This report requires street address level data for risks located in postcodes 2000, 3000, 4000, 5000, and 6000. As the purpose of this information is to allow accurate exposure modelling in these high-density areas, the location details are very important (full street address at a minimum, GNAF or Latitude/Longitude is preferred). This level of detail must be provided for all eligible building, contents, and business interruption risks within these postcodes, regardless of risk size or policy type (stand-alone contents or stand-alone business interruption policies should be included in the Street Address Report).
The retention figure noted in ARPC’s Reinsurance Agreement for Terrorism Risks is an annual aggregate retention to be applied during the same retention period.
No. The Treasurer’s Direction (available here) to Australian Reinsurance Pool Corporation (Risk Retention) requires ARPC to apply a separate retention to each individual entity that reinsures its eligible terrorism risk with ARPC. The Explanatory Memorandum to the Terrorism Insurance Bill 2003 reinforces that it was the Government’s intention that a separate retention be applied to each individual entity that reinsures with ARPC. Item 1.1 of the Revised Explanatory Memorandum states that the retention will be set “per insurer” and item 3.38 describes the retention for “each insurer that reinsures with the ARPC”.
The PACE Terrorism portal was first made available to terrorism pool insurers on 1 October 2024 and was fully operational from 1 April 2025.
Yes. However, ARPC’s Underwriting team have been reaching out to relevant insurer contacts to confirm if PACE Terrorism access is required.
Once the insurer’s email address has been registered in PACE Terrorism, the insurer can authenticate using the One Time Password (OTP) method.
Please contact [email protected].
No, there is no change in the data reporting requirements for the terrorism pool.
Insurers will be required to complete the templates provided by ARPC and upload them into PACE Terrorism.
Please contact [email protected] or [email protected].
Insurers are responsible for adjusting, managing and paying eligible terrorism claims that are valid under the original insurance policy document (PDS) and in accordance with the TCI Act and Regulations.
Insurers should then download the Claims bordereau template from PACE Terrorism, populate the required data then upload the completed template containing eligible terrorism claims via PACE for processing. More information is available in the Claims section of this website.
PACE Terrorism UAT is a separate environment which replicates PACE Terrorism Production. Insurers can perform testing of all functions, including their premium returns. It gives insurers an opportunity to practice and gain familiarity with PACE Terrorism, and enables them to correct any errors in their returns before uploading the final information into PACE Terrorism Production.
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PACE Cyclone is ARPC’s Cyclone Reinsurance Pool (cyclone pool) insurer customer portal, which allows cyclone pool insurer customers to lodge their company information in a secure and user-friendly environment.
PACE Terrorism is ARPC’s new Terrorism Reinsurance Pool (terrorism pool) insurer customer portal, which allows terrorism pool insurer customers to lodge their company information in a secure and user-friendly environment.