Purpose

The Terrorism Reinsurance Pool (the terrorism pool) provides insurers with reinsurance for commercial property and associated business interruption losses arising from a Declared Terrorist Incident (DTI).

The terrorism pool operates differently to the Cyclone Reinsurance Pool and is not mandatory for insurers. Insurers can choose to reinsure the risk of claims for eligible terrorism losses by entering into a reinsurance agreement with ARPC.

What is the terrorism reinsurance pool?

The terrorism pool provides insurers with reinsurance for commercial property and associated business interruption losses arising from a DTI. 

When is the terrorism pool triggered to pay losses?

The Minister responsible must officially announce a DTI before the provisions within the Terrorism and Cyclone Insurance Act 2003 (TCI Act) can be triggered. Once a DTI is declared, The TCI Act overrides terrorism exclusion clauses in eligible insurance contracts, enabling coverage of eligible terrorism losses arising from a DTI. 

Background of the terrorism pool

The terrorism pool was established under the TCI Act in 2003 following the September 11 attacks in the United States, which led to the withdrawal of terrorism cover by insurers. The terrorism pool was created to ensure that businesses could continue to obtain insurance coverage for terrorism-related risks.

Government support

The terrorism pool is supported by a $10 billion Government guarantee.

Claims

Claims against the terrorism pool will be reimbursed to the insurer as per the Reinsurance Agreement with ARPC.

How does a terrorism event become a Declared Terrorist Incident (DTI)?

The Minister responsible must officially announce a DTI before the provisions within the Terrorism and Cyclone Insurance Act 2003 (TCI Act) can be triggered. Once a DTI is declared, The TCI Act overrides terrorism exclusion clauses in eligible insurance contracts, enabling coverage of eligible terrorism losses arising from a DTI. This differs from the Cyclone Reinsurance Pool where claims are only eligible if they are settled by insurers in accordance with the original policy terms, conditions and exclusions.

If an event becomes a declared terrorist incident, what does this mean for my insurance cover?

If there is a DTI, all insurers must override terrorism exclusion clauses in eligible policies and pay policyholders their eligible losses, as per their policy’s terms and conditions. This differs from the Cyclone Reinsurance Pool where claims are only eligible if they are settled by insurers in accordance with the original policy terms, conditions and exclusions.

What are eligible insurance contracts under the terrorism pool?

An eligible insurance contract is one which provides insurance cover for loss or damage to eligible property and associated business interruption and public liability losses (please refer to Section 7 of the TCI Act).  

Eligible property is defined as the following property located in Australia: 

• buildings (including fixtures) or other structures or works on, in or under land
• tangible property that is located in or on such property
• eligibly property as prescribed by the TCI Act. 

Farms can also obtain cover if they hold insurance against business interruption.

How are claims under the terrorism pool funded?

The terrorism pool is a reinsurance arrangement between insurers and ARPC. Claims against the terrorism pool are reimbursed to insurers once an insurer’s claims exceed their excess. This does not impact your claim with your insurer.  If total claims exceed funds available to ARPC, they will continue to be met by a $10 billion Commonwealth guarantee.