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2019-20 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

ARPC expresses its purpose through its vision and mission.

ARPC vision and mission

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.

ARPC Values

ARPC values

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Strategic context

Addressing market failure

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

After 17 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 exists. 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 2018 Triennial Review1 concluded that there continues to be partial market failure and recommended that the Act remain in force and that the scheme remain in place. The Review stated: “In the absence of the Act there would likely be a market failure in the terrorism insurance market with wider economic implications. The estimated global commercial market capacity available for Australian terrorism reinsurance is considered short of the level required to cover against large, but possible, terrorism incidents. Several reinsurers have indicated they would find it difficult to participate in the Australian terrorism insurance market without a mechanism like the ARPC.”

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

1 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.

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, the attempt to load a chemical bomb onto an aircraft departing Sydney, and a plot to use an improvised explosive device to disrupt an electrical substation on the New South Wales south coast.

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 National Terrorism Threat Advisory System (NTTAS).

The 2019-20 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/Securityandyourcommunity/Pages/National-Terrorism-Threat-Advisory-System.aspx

National Terrorism Threat Advisory System (NTTAS)

National Terrorism Threat Advisory System (NTTAS)

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Strategic priorities

ARPC’s 2019-23 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 2019-23 Strategic Priorities

ARPC made progress against all five strategic priorities outlined in the 2019-23 Corporate Plan
in the following five key performance areas:

One: Providing reinsurance for eligible terrorism losses

Two: Encouraging private sector participation through retrocession

Three: Compensating the Government

Four: Maintaining financial sustainability and organisational resilience, and

Five: Engaging, understanding, and collaborating with stakeholders.

Activities undertaken to progress ARPC’s strategic priorities in these key performance areas are
detailed in Activities undertaken to progress ARPC’s strategic priorities.

Activities undertaken to progress ARPC’s strategic priorities

Strategic Priority
1. Extend thought leadership and expertise

Key Performance Areas

Core activities and achievements






Completed the Cyber Terrorism Research project in conjunction with the University of Cambridge’s Centre for Risk Studies and the OECD. Released research findings in a Compendium which is available on our website. The formal launch event scheduled for 18 March 2020 was postponed due to COVID-19.

The Standards Australia Handbook for ‘Base Building Physical Security Handbook – Terrorism and Extreme Violence’ is nearing completion. ARPC has facilitated the inclusion of additional input from national security agencies. The final handbook will be published in 2020-21.

Continued to identify and educate the market about potential gaps in cover. Initiated development of a research paper with the University of Queensland on insurance market gaps in relation to terrorism.

Participated in the OECD High Level Advisory Board.

Initiated preparations for the 2021 Triennial Review of the ARPC scheme undertaken by Treasury by preparing suggested terms of reference which have been shared with Treasury. Resources have been allocated to provide Treasury all necessary assistance.

* 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 2019 Terrorism Risk Insurance Seminar with positive stakeholder feedback.

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.

Participated in the OECD High Level Advisory Board.

Detailed preliminary work undertaken with consultants before launching our first stakeholder survey.

* 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 the Government at the request of the Minister.

Continued to enhance the claims response plan.

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

Development of geospatial catastrophe modelling covering all mainland locations in Australia.

Purchase retrocession reinsurance to increase ARPC’s total funds available for claims following a DTI, while minimising the need to call on the Commonwealth guarantee.

* 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.

Shared the Ownership Model Feasibility Study with Government.

Completed the cyber terrorism research project. Research Compendium is available to stakeholders in industry and government from our website. Research has been provided to Treasury and will inform the 2021 Triennial Review.

Continue to review and upgrade the IT environment for maximum operational effectiveness.

* 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.

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 governance and compliance redesign to maintain best practice.

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

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Working with ARPC stakeholders

ARPC is committed to timely, open communication with stakeholders and strives to understand their needs, meet their expectations, and deliver additional value. During 2019-20, 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.

Activity-based metrics

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

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

ARPC also engaged in other stakeholder activities including:

  • events such as our annual Terrorism Risk Insurance Seminar, and our stakeholder cocktail events in Sydney and Canberra
  • insurer review program
  • electronic direct mail distribution of our quarterly newsletter Under the Cover
  • LinkedIn posts
  • Website, and
  • articles in insurance industry publications.

Outcomes-based metrics

During the year, ARPC has worked with ORIMA to develop its inaugural stakeholder engagement survey which will be conducted in 2020-21. This survey will establish a benchmark and is designed to answer the following big questions:

  • Is ARPC delivering to its vision?
  • What is stakeholder sentiment towards ARPC?
  • Does ARPC provide value for money?
  • Is ARPC’s engagement effective?

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 2019-20, 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 catastrophe modelling outcomes.

ARPC’s insurer customer (cedant) 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 updated in May 2020, is a repository for information about the scheme and how it operates, as well as for 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 2019-20, ARPC attended industry conferences and events including (but not restricted to):

  • ARPC Sydney Terrorism Risk Insurance Seminar
  • ARPC market briefing (Sydney) for the 2020 retrocession program
  • IFTRIP Conference in Brussels
  • ANZIIF Reinsurance Discussion Group events
  • NIBA Convention
  • ANZIIF Annual Insurance Industry Awards, and
  • Insurance Council of Australia events.

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ARPC engages with global terrorism pools

ARPC’s stakeholder engagement strategy includes developing links with peer terrorism pools
in other countries to share knowledge and experience. This is achieved through membership of the International Forum of Terrorism Risk (Re)Insurance Pools (IFTRIP), an organisation of national terrorism pools.

IFTRIP was formally ratified at the ARPC-OECD Global Terrorism Risk Insurance Conference in Canberra in 2016. Subsequent annual conferences have been held in Paris (2017), Moscow (2018) and Brussels (2019). The 2020 IFTRIP Conference was scheduled to take place in the US capital of Washington DC but will now be run as a virtual event in October 2020 due to the COVID-19 pandemic.

IFTRIP 2020 is a global event for those either working in or advising on terrorism reinsurance and risk. The main Conference brings together sovereign-backed terrorism reinsurance pools, industry experts and the wider counter terrorism community.

Dr Christopher Wallace, ARPC CEO, was appointed President of IFTRIP for 2020. Chris’s appointment was announced at the IFTRIP annual conference in Brussels in 2019 and he assumed his new IFTRIP role in January 2020.

“I was honoured to be appointed President of IFTRIP, an organisation which has improved cooperation and goodwill between national terrorism insurance pools at a time of rapidly evolving terrorism trends,” Chris said. “During my tenure as President, I look forward to extending IFTRIP’s membership outreach particularly to Asian insurance markets and highlighting the human impact of terrorism,” he said.

This year’s IFTRIP Conference was rescheduled from June to October due to the travel restrictions imposed as a result of the COVID-19 pandemic, and then subsequently altered to a virtual format.

It was Australia’s turn to host the 2021 IFTRIP Conference but, with the 2020 event occurring in a virtual format, Washington will host the 2021 IFTRIP Conference. As is usually the case, the public conference will be preceded by a one-day closed terrorism pools (only) event.

The following institutions are members, observers or invitees of IFTRIP: Australia (ARPC); Austria (GRAWE); Belgium (TRIP); Denmark (FINANSTILSYNET); France (GAREAT, CCR); Germany (Extremus); India (GIC); Israel (ITC); Namibia (NASRIA); Netherlands (NHT); Russia (RATIP); South Africa (SASRIA); Spain (CCS); USA (TRIP); UK (Pool Re), Sri Lanka and Nepal.

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ARPC hosts the Terrorism Landscape Seminar

ARPC’s 4th annual Terrorism Risk Insurance Seminar was held on Thursday, 29 August 2019
at NSW Parliament House, Sydney.

Themed The Terrorism Landscape, more than 100 delegates from the insurance industry, government agencies and academia heard presentations on local and global terrorism threats, espionage and foreign interference, cyber terrorism, the financial loss caused by exclusion zones that follow terror attacks, and CBRN weapons.

Keynote speakers represented ASIO’s Counter Espionage and Foreign Interference Division; Control Risks; the Australian Government’s Defence, Science and Technology Group (DSTG); Professor Greg Barton and ARPC.

Seminar speakers and topics

Seminar speakers and topics

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ARPC reveals cost of cyber terrorism

ARPC identified cyber terrorism causing physical property damage as an emerging risk requiring further research to inform Government policy and to assist the insurance and property sectors in Australia.

So, in late 2018, ARPC commissioned a research project to examine 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, University of Cambridge (Cambridge).

The scope (below) was split between OECD and Cambridge with OECD addressing items one to three and Cambridge points four to seven.

Project scope

  1. an evaluation of available insurance coverage in Australia for cyber attacks involving declared acts of war, criminality and/or terrorism
  2. the practicalities of extending ARPC’s insurance coverage to include cyber terrorism
  3. evaluating relevant international experience in introducing coverage of cyber terrorism to terrorism insurance schemes
  4. the direct and indirect impacts, in dollar terms, of insured and uninsured losses to commercial property and business interruption from acts of cyber terrorism
  5. estimates for Australian losses and the Australian economic impact
  6. realistic cyber attack scenarios in an Australian context – both current and prospective – including likelihood, direct/indirect impacts and existing insurance coverage and
  7. identification of systemic or contagion risks from cyber risks to the Australian economy.


The key findings are that cyber terrorism is not covered by commercial property insurance in Australia and the terrorism reinsurance scheme administered by ARPC excludes cover for cyber terrorism.

The scenario analysis conducted by Cambridge demonstrates that the average expected losses from the two modelled scenarios – a Lithium Battery fire scenario and a Building Management System Attack – are consistent with the expected losses from a traditional blast attack in the Sydney CBD and are within the capacity of the scheme. The maximum losses from these cyber attacks are significant and exceed the capacity of the scheme. The maximum losses from the lithium-ion battery scenario is similar to the maximum loss from a sophisticated biochemical attack using weaponised grade materials as shown in Comparison of Cambridge (in dark orange) and ARPC scheme scenarios.

Comparison of Cambridge (in dark orange) and ARPC scheme scenarios

Comparison of Cambridge (in dark orange) and ARPC scheme scenarios

Availability of coverage in Australia

The OECD research found that a cyber insurance market is emerging in Australia to provide cover for first party and third-party liability claims that may arise from malicious and accidental cyber incidents, with cover for property damage extensively sub-limited. The widespread use of the ISR Mark IV wording for property insurance has resulted in broad coverage for property damage resulting from cyber attacks. However, almost universally, these policies have exclusions for war and terrorism. Thus, they exclude cover for physical damage to commercial property from cyber terrorism.

In the event of a Declared Terrorism Incident (DTI) in Australia, the terrorism exclusions in the underlying insurance policy are annulled and insurers would be required to pay claims to the extent the cover is for an eligible insured risk under the ARPC scheme.

As cyber is not an eligible peril under the ARPC scheme, the terrorism exclusion in the underlying policy would not be annulled. The result is that losses from a cyber terrorism incident causing property damage to commercial property would be largely uninsured.

Practicalities of extending ARPC’s insurance coverage to include cyber terrorism

The probability of a cyber terrorism incident causing property damage is currently remote, although the potential for significant losses is possible.

Coverage for physical damage cyber terrorism is unlikely to become available without the involvement of ARPC and reinsurers involved in the study indicated that given the challenges with modelling and underwriting this risk, their preferred method of involvement was assuming part of the aggregate risk through ARPC.

If cyber was to be included in the ARPC scheme, the pricing methodology and coverage would also need to be considered. For cyber attacks, the distinction between malicious, criminal, terrorism and war is blurred and it is very difficult to attribute with certainty the origin of an attack.

International experience

The OECD research found that Germany, Spain and South Africa provide direct insurance coverage without cyber exclusions.

For the reinsurance or co-insurance schemes in Austria, Belgium, France, Netherlands, UK and the USA, cover for cyber terrorism is included to the extent it is covered in the underlying policy.

In the reinsurance schemes in France and the UK, cyber terrorism cover is explicitly included.

In India and Russia, cyber terrorism is explicitly excluded, as is the case in Australia.

Launch event rescheduled

The final research reports comprising an ARPC Management Summary and the OECD and Cambridge reports have been published in a Compendium format titled Insurance risk assessment of cyber terrorism in Australia.

The launch event will take place as a Webinar on Thursday, 3 September 2020. In the interim period, the compendium is available for viewing by digital request form at arpc.gov.au/

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ARPC expands modelling with geospatial catastrophe model

ARPC has enhanced its two-dimensional geospatial catastrophe model to expand the region it can analyse and improve the way that insurance losses are calculated in the event of a terrorism incident.

ARPC is working with Risk Frontiers, a modelling firm that specialises in the assessment
and management of disaster risk across Australia and the Asia Pacific, and has achieved the
following enhancements:

  • 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 shielding effects of neighbouring buildings on containing blast effects

The expansion of the model to capture all suburban and regional areas is vital in understanding the financial impacts of a terrorism incident that may occur beyond the CBD locations. In the event of an incident occurring, ARPC can run the model immediately to quickly estimate insured losses to infrastructure, assets and business interruption anywhere in Australia, including suburban shopping centres, mixed-use assets, industrial centres, sporting facilities and major infrastructure such as power stations and gas plants.

The geospatial catastrophe model also allows ARPC to model various scenarios prior to an incident occurring, to investigate the impact of exclusion zones on surrounding businesses. These insights have proved valuable to police in informing their own procedures.

Outputs 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 went live at year end.

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ARPC supports Standards Australia risk mitigation handbook

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 and contributed to the drafting of the Handbook.

The working title of the Handbook has recently been updated from Physical Protective Security Treatment for Buildings Handbook. Now called Base-building Physical Security Handbook – Terrorism and Extreme Violence, it will provide guidance to owners and operators of commercial buildings on identifying and assessing relevant sources of building risk associated with terrorism and other deliberate acts of extreme violence (such as civil commotion), and implementing suitable controls to mitigate such risk.

The draft Handbook was opened for Public Comment in April/May. This allowed various stakeholders, including industry professionals and consultants, organisations and other government bodies to review the draft and provide their feedback.

The Drafting Committee met throughout May and June to address the feedback received during the Public Comment phase and will make further drafting changes to the Handbook. It is expected the Handbook will be published next financial year.

The Handbook aligns with ARPC’s strategic objectives, particularly to “extend thought leadership and expertise” and to “engage, understand and collaborate with stakeholders.” Over the next few months, ARPC will formulate a plan to officially launch the Handbook with a series of meetings and presentations to insurers and property owners, in the form of a ‘roadshow’.

The roadshow and promotion of this important resource will assist in promoting ARPC as a key advisor in the field of terrorism risk mitigation and allow ARPC to strengthen relationships with key stakeholders.

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