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2018-19 ARPC’s Strategy


ARPC is a public financial corporation established on 1 July 2003 under the Terrorism Insurance Act 2003 (TI Act) to administer the terrorism insurance scheme (the Scheme). It was established following the terrorist attacks in the USA on 11 September 2001. After this event, there was a global withdrawal of terrorism insurance cover, leaving commercial property in Australia uninsured against terrorist attacks. This market failure reduced access to project funding and commercial refinancing which financially threatened some sectors of the Australian economy.

The TI Act prescribes the function of ARPC, which is to provide insurance cover for eligible terrorism losses (whether by entering into contracts or by other means) and any other functions prescribed by the regulations.

ARPC was established by the Australian Government with the support of stakeholders in the property, banking, insurance and reinsurance sectors.

Under the Public Governance, Performance and Accountability Act 2013 (PGPA Act), ARPC is classified as a corporate Commonwealth entity. This classification means that ARPC is subject to the financial and non-financial reporting requirements of the PGPA Act.

Vision, Mission and Values


To be an effective provider of terrorism risk insurance that facilitates private participation, supports national resilience and reduces losses arising from catastrophic events caused by terrorism.


  • Provide confidence to the market, knowing that in the event of a claim, we will pay claims and deliver on our promise
  • Support recovery following a terrorism incident
  • Provide links between government, national security, and the private insurance market to enhance understanding of the risk
  • Address a market failure and provide cover for terrorism where the private market is unable to
  • Lead international collaboration on terrorism risk insurance

ARPC remains true to the Scheme’s original policy objectives and is focused on creating greater value for stakeholders.

To deliver on the Vision and Mission, ARPC strives for a collaborative and high-achieving culture underpinned by integrity, personal leadership and professional development.

These values support the strategy and are fundamental to the success of the organisation.
These values also support the ARPC Code of Conduct.

Figure 1.1: ARPC Values

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Addressing market failure

ARPC addresses market failure in the Australian commercial property terrorism insurance market through risk sharing and mitigation.

After 16 years of the Scheme and ARPC’s operation, a whole-of-market, sustainable, alternative provider of terrorism reinsurance does not exist in Australia or the global market, such that partial market failure still exists1. The global reinsurance market has insufficient capacity to offer uniform terrorism risk insurance coverage to the Australian market at affordable prices, a situation unlikely to change in the near term.

The 2015 Triennial Review2 considered the availability of reinsurance for terrorism risk in detail. It concluded that the availability and pricing of private sector terrorism insurance has improved, owing to the low incidence of major terrorism claims, better risk modelling and greater competition among reinsurers. However, there is still partial market failure. This was reconfirmed in December 2018, in the 2018 Triennial Review.

The 2018 Triennial Review report estimates that terrorism risk reinsurance available at reasonable prices to Australian insurers totals around $4 billion, well below the $13.6 billion of reinsurance cover provided by the Scheme.

International threat environment

The international threat environment for terrorist events has changed dramatically in recent years. Terrorist attacks in London, Manchester, Paris, Sri Lanka, and Melbourne show an increase in the frequency of terrorism. There has also been a growing trend where perpetrators of terrorist acts are individuals who have not previously been on the authorities’ radar, but who are unstable and susceptible to rapid radicalisation.

Australian threat context

Australia has seen several terrorist incidents prevented, including lone-perpetrator actions and the attempt to load a chemical bomb onto an aircraft departing Sydney.

On 26 November 2015, the Australian Government launched the National Terrorism Threat Advisory System (NTTAS) to inform the public about the likelihood of an act of terrorism occurring in Australia. NTTAS has five levels to indicate the national threat level as shown in Figure 1.2.

Figure 1.2: National Terrorism Threat Advisory System (NTTAS)

The current NTTAS threat level is Probable, reflecting the intelligence assessment by the National Threat Assessment Centre. Probable means credible intelligence, as assessed by security agencies, indicates individuals or groups have developed the intent and capability to conduct a terrorist attack in Australia. The current level has not been introduced in response to a specific threat.

For more information on the National Terrorism Threat Advisory System and the current level of alert, please visit: www.nationalsecurity.gov.au/threatlevel

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ARPC’s 2018-22 Corporate Plan set out five strategic priorities based on business objectives.

  • Extend thought leadership and expertise.
  • Engage, understand and collaborate with stakeholders.
  • Provide a world class response to terrorism incidents.
  • Embrace and evolve to a changing market environment.
  • Enhance and strengthen the resilience and preparedness of our people and organisation.

Progress against the 2018-22 Strategic Priorities

ARPC made progress against all five strategic priorities outlined in the 2018-22 Corporate Plan, reflected by four key performance areas. These align with ARPC’s objectives under the TI Act as per the Explanatory Memorandum:

One: Providing reinsurance for eligible terrorism losses

Two: Encouraging private sector participation through retrocession

Three: Compensating the Government, and

Four: Maintaining financial sustainability and organisational resilience.

Figure 1.3: Activities undertaken to progress ARPC’s strategic priorities

Strategic Priority

1. Extend thought leadership and expertise

Key Performance Areas

Core activities and achievements





Progressed Cyber Terrorism Research project in conjunction with Cambridge University Centre for Risk Studies and the OECD.

Progressed Standards Australia Handbook for Physical Protective Security Treatments for Buildings. This is on track with the completion of the first draft and an expectation the final handbook will be published in 2020.

Continued to identify and educate the market about potential gaps in cover.

Participated in the OECD High level Advisory Board.

* Core activities and achievements have been allocated to the Key Performance Areas that they predominantly address

Strategic Priority

2. Engage, understand and collaborate with stakeholders

Key Performance Areas

Core activities and achievements





Engaged with stakeholders to deepen understanding and develop greater understanding and consensus on the TI Act and Regulations.

Delivered the 2018 Terrorism Risk Insurance Seminar with positive stakeholder feedback.

Met with 25 key stakeholders as part of the Ownership Model Feasibility Study to discuss the proposal, obtain their views and include their input in the study.

Delivered informative and relevant presentations at industry events, including conferences.

Met with government representatives, insurers and commercial property owners to inform them about scheme coverage.

* Core activities and achievements have been allocated to the Key Performance Areas that they predominantly address

Strategic Priority

3. Provide a world class response to terrorism incidents

Key Performance Areas

Core activities and achievements





Conducted multiple tests of the DTI Response Procedure for continuous improvement.

Provided advice to government at the request of the Minister.

Reviewed and enhanced the claims response plan with a view to continuous improvement.

Continued development of 3D loss estimate modelling for
blasts and biochemical events throughout Australia.

Development of geospatial loss modelling covering all mainland locations in Australia nearing completion.

* Core activities and achievements have been allocated to the Key Performance Areas that they predominantly address

Strategic Priority

4. Embrace and evolve to a changing market environment

Key Performance Areas

Core activities and achievements





Worked with government stakeholders to implement postcode changes effective 1 July 2019.

Completed the Ownership Model Feasibility Study.

* Core activities and achievements have been allocated to the Key Performance Areas that they predominantly address

Strategic Priority

5. Enhance and strengthen the resilience and preparedness of our people and organisation

Key Performance Areas

Core activities and achievements





Purchased retrocession to increase ARPC’s total funds available for claims post a DTI whilst minimising the need to call on the Commonwealth guarantee to pay initial claims.

Judiciously managed net assets so ARPC maximises its financial performance.

Implemented a holistic Capital Management Policy to support ARPC’s financial sustainability.

Produced monthly reporting based on balanced scorecard key performance indicators.

Made payments to government as per the current Ministerial Direction.

Updated IT strategy identifying future roadmap for IT.

Increased the cyber security and operational efficiencies from moving to a Cloud IT environment. Achieved ‘Digital Continuity Champion’ status from the National Archives of Australia.

2018 Triennial Review completed in December 2018.

Identified technological tools to increase staff efficiency and effectiveness and their ability to interact with key stakeholders.

Delivered staff training to develop, connect and empower ARPC’s people towards execution of meaningful work.

Engaged all staff in mid-year and year-end performance conversations and appraisals.

Completed the ANAO Performance Audit with a favourable outcome.

* Core activities and achievements have been allocated to the Key Performance Areas that they predominantly address

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ARPC is committed to timely, open communication with stakeholders and strives to understand their needs, meet their expectations, and deliver additional value. During 2018-19, ARPC continued to develop and sustain stakeholder relationships. Regular meetings were held with insurers, major commercial property owners, relevant state and Australian Government agencies and industry associations. ARPC also provided customer advice on reinsurance agreements and insurer premium submissions.

Face-to-face meetings were held during the reporting period with the following stakeholders:

  • insurer customers
  • retrocessionaires3
  • industry bodies
  • Australian Government representatives at local, state and federal levels, and
  • state insurance corporations.

As part of the Ownership Model Feasibility Study, ARPC met with 25 major stakeholders to understand their views of the scheme and to get their input on alternative ownership models, with increased insurance industry involvement.

Knowledge sharing

ARPC believes that sharing knowledge with stakeholders enhances existing relationships and helps to develop a better understanding of ARPC, the TI Act, and the environment in which ARPC operates. During 2018-19, ARPC representatives attended various industry forums as delegates and presenters, to share information and ideas.

Retrocession renewal discussions also provided an opportunity for ARPC to present the latest information on Australian terrorism risk and the results from the portfolio risk analysis, including blast and plume modelling outcomes.

ARPC’s cedant (insurer customer) review program is an integral part of ARPC’s stakeholder engagement efforts. The program takes a collaborative approach, educating insurer customers about the requirements and function of the scheme to generate increased compliance. The program also provides an opportunity to share insights into the contemporary terrorism landscape and provide information on the strategic projects ARPC is undertaking.

Communications and publications

ARPC publishes a quarterly digital newsletter called Under the Cover aimed at insurer customers and other subscribers to provide information relating to reinsurance cover with ARPC. This includes postcode updates for reporting exposures and other information regarding reinsurance agreement obligations.

ARPC also uses Electronic Direct Mail (eDMs) to communicate with insurer customers about changes to the Scheme, deadlines for returns or submissions and any other relevant information.

ARPC has a company LinkedIn page to share announcements, event coverage and other news with our stakeholders.

Our website, which was relaunched two years ago, is a repository for information about the scheme and how it operates, as well as annual publications, newsletters, events, media releases and Q&As.

Industry involvement

ARPC engages with the Australian and international re/insurance industries through various forums. Participation in industry events raises stakeholder awareness of the Scheme and provides an opportunity for stakeholders to stay informed about global developments in terrorism risk and insurance. During 2018-19, ARPC attended industry conferences and events including (but not restricted to):

  • ARPC Sydney Terrorism Risk Insurance Seminar;
  • ARPC market briefing (Sydney) for the 2019 retrocession program;
  • Nuclear Threat Initiative workshop on biological risk in London;
  • IFTRIP Conference in Moscow;
  • Reinsurance Discussion Group events;
  • NIBA Convention;
  • ANZIIF Annual Insurance Industry Awards; and
  • Insurance Council of Australia events.

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In late 2018, ARPC commissioned a research project on the nature and cost of physical damage to commercial property (including business interruption) caused by acts of cyber terrorism. The researchers selected to undertake the project were the Organisation for Economic Co-operation and Development (OECD) and Cambridge Centre for Risk Studies at the Judge Business School, Cambridge University (CCRS). The research, Insurance risk assessment of cyber terrorism in Australia is due to be published in early 2020. It is designed to identify and explore current and prospective threats, plausible scenarios, as well as the practicalities of extending insurance coverage to include cyber terrorism in Australia.

Business insurance policies and the ARPC scheme exclude coverage for acts of cyber terrorism which affect commercial and high value residential property in Australia. ARPC expects the cyber research study findings to inform development of government policy in this important area, including the three-year review of the terrorism insurance scheme by the Treasury.

The research will also make a significant contribution to the data set and knowledge of cyber terrorism risk in Australia.

CCRS has a solid reputation and deep experience in cyber terrorism research and recently completed an assessment of the current state and future shape of the cyber terrorist threat to the UK mainland and economy titled Cyber Terrorism: Assessment of the Threat to the Insurance Industry. The OECD has extensive knowledge of terrorism pools, like ARPC and its global peers, including their insurance coverage of current and emerging terrorism issues.

 Dr Christopher Wallace, ARPC CEO, addresses the March 2019 Cyber scenarios workshop hosted by Cambridge Centre for Risk Studies

Status update

CCRS and the OECD are working with ARPC and the Australian insurance industry to collect data for, and gather feedback on, cyber terrorism scenarios and to develop a clear picture of cyber-related insurance coverage in property and stand-alone cyber policies. In the past year, both researchers have visited Australia to run workshops for these purposes. The resulting analysis will form the final draft reports, provided to ARPC for review during August and September 2019.

Industry consultation

In March 2019, CCRS visited Sydney and co-hosted a specialty cyber scenarios workshop with representatives from the IT, security and risk industries to discuss various scenarios for the research.

In May 2019, the OECD hosted a Sydney workshop to identify and discuss the implications of gaps in cyber coverage across property and cyber policies. The event was attended by senior representatives of major insurers.

Next steps

In late 2019, ARPC will review the researchers’ final draft reports in accordance with the project scope and objectives. ARPC will then produce a report which will be shared with the Government and industry stakeholders and launched to the wider market.

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ARPC’s Risk Mitigation Handbook proposal approved by Standards Australia

ARPC is the Project Proponent and Drafting Leader of Standards Australia’s HB-188 Handbook Physical Protective Security Treatments for Buildings due for publication in late 2019 or early 2020.

The Handbook is designed as a quick reference guide, containing commentary and resources on risk mitigation for deliberate acts of physical damage. It references existing approaches from the various security, building and risk/insurance industries, and importantly provides a platform for businesses to develop frameworks and strategies of their own.

A proactive approach to risk management

In 2018, ARPC submitted a proposal to peak standards development body Standards Australia for the development of a handbook to support proactive risk management for deliberate acts of physical damage to large-scale infrastructure (commercial buildings).

Australian industry stakeholders and representative bodies across insurance, commercial property, facilities management, events management, local government, fire services and national security supported the proposal. They also volunteered their expertise and participation in the project.

In addition to supporting owners and operators of commercial buildings, the Handbook will benefit a wide range of audiences who want to elevate their current risk mitigation practices.

Link with ARPC strategy

The Handbook aligns with ARPC’s strategic objectives, particularly to “extend thought leadership and expertise” and to “engage, understand and collaborate with stakeholders.”

The Handbook is also designed to encourage higher quality risk management in the insurance market.

Final stages ahead of review

Standards Australia’s editing team is reviewing the final draft of the Handbook and will soon open it for a six-week peer review period. Comment will be sought from subject matter experts across government and industry.


In a pilot program for Standards Australia, called the ‘incubator’ initiative, the Handbook project used an online collaboration tool to fast-track the drafting of content. It is the first Handbook to be published for this topic.

Next steps

Following the peer review period, ARPC and Standards Australia will review the draft Handbook following comments received. Standards Australia editors will then review the document before its release in late 2019 or early 2020.

Handbook publication will be in varying formats, from several distribution partners, announced closer to the release date.

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As a key part of its strategic priority to engage, understand and collaborate with stakeholders, ARPC hosts an annual seminar. The third ARPC Terrorism Risk Insurance Seminar was held in November 2018 at NSW State Parliament.

Approximately 90 people from the re/insurance industries, government sector and academia attended the event, which was chaired by Dr Christopher Wallace, ARPC Chief Executive.

The Seminar program covered current and emerging trends in terrorism and included:

  • an Australian Government briefing on the terrorist threat in Australia;
  • the cyber terrorism threat, including insights on the cyber insurance market; and
  • Australia’s private security guard force and counter terrorism.

Seminar speakers comprised:

  • ASIO’s Business and Government Liaison Unit;
  • Leigh Wolfrom, Policy Analyst, OECD; and
  • Dr Anthony Bergin, Senior Analyst, Australian Strategic Policy Institute, and Senior Research Fellow, Australian National University.

Session moderators included: Elaine Collins, ARPC Board Member; Michael Pennell, ARPC Chief Underwriting Officer; and Lisa Hiscock, Senior Underwriter, Crisis Management, AXA XL.

ARPC will host its fourth Terrorism Risk Insurance Seminar in August 2019.

 Dr Anthony Bergin, Senior Analyst, Australian Strategic Policy Institute addressing the 2018 Seminar

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ARPC is developing a geospatial model to improve the way that insurance losses are calculated. This will assist ARPC following a terrorism incident, as well as to better understand the potential losses prior to an incident. The geospatial modelling will also be available to other law enforcement and security agencies to assist their operations.

Risk Frontiers, a modelling firm that specialises in the assessment and management of disaster risk across Australia and the Asia Pacific, was contracted to build a geospatial model expanding ARPC’s capability to estimate insured losses in all locations across Australia. This model includes all suburban and regional areas which are unavailable through ARPC’s current loss models.

Enhancing the 2D model

Risk Frontiers has been enhancing ARPC’s existing two-dimensional blast model by:

  • expanding coverage beyond current Tier A locations to include Tier B and C locations;
  • incorporating an “exclusion zone” effect to capture business interruption costs caused by business not being able to operate owing to access restrictions following a terrorism event;
  • employing up-to-date imagery to faithfully represent the current situation on the ground; and
  • incorporating the effects of neighbouring buildings on containing or magnifying blast effects.

The geospatial model will use information from aerial photographs, postcode aggregate exposure information and damage curves for various building types.

Speedy insured loss estimates

The geospatial model will enable ARPC to quickly estimate insured losses anywhere in Australia, particularly for suburban shopping centres, mixed-use assets, industrial centres, sporting facilities and major infrastructure such as power stations and gas plants, which have been previously unavailable.

Output from the model will include vulnerability curves, charts showing exposure and loss relative to sums insured and total loss by distance, as well as a list of the affected land parcels and associated sums insured and estimated losses.

The project is currently in its final stages and is being tested for completeness and accuracy. It is expected the model will be in use by ARPC during the first half of 2019-20.

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  1. As stated in the 2018 Triennial Review.
  2. The TI Act is reviewed every three years by The Treasury to assess the level of market failure and the need for ARPC to continue.
  3. A reinsurer that accepts retrocession business

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