General FAQs


Can I use a post office box address to determine the applicable tier rate?

ARPC reinsurance premiums are calculated based on 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 in order to determine the appropriate tier and accurately calculate the reinsurance premium. Postcodes assigned to post office box locations are not to be used.

How are railway tracks and pipelines applied to the tier rates?

Railways and pipelines can traverse many areas and it is difficult to accurately determine the gross base premium applicable to the various ARPC tiers. We recommend that insurers use the risk’s structures such as railway stations, signal boxes or pipeline refinery and booster facilities to determine the tier location and calculate the premium according to those tiers. We do not expect insurers to trace every kilometre of track or pipeline.

Note that the reinsurance premium is applicable to the whole of the eligible premium, including that of pipelines, tracks and structures.

What do I do when a postcode straddles State boundaries?

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 these postcodes are used to ensure the risk location is recorded in the correct State.

How do I account for annual construction policies?

ARPC has agreed to apply our reinsurance tier rates to the insured’s estimate of contracts which will be commenced during the annual construction policy period. We do not require clients to adjust the initial reinsurance premium upon receipt of the 12 month declaration.

We prefer clients to calculate premium based on estimates of the total contract values in each of the three tiers but 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 contracts may also be used as the basis for figures submitted in the contract works section of the annual aggregate report.

Should insurers show their terrorism insurance premium as a separate item on policy documents?

Insurers have the option to show terrorism premium as a separate item because the amount charged is decided by the insurer, not ARPC. However, we are aware that insurers use ARPC’s reinsurance cost as the basis for determining their terrorism insurance premium. ARPC’s reinsurance premium is the same as any other reinsurance costs. Consequently, we would prefer that it is treated in the same manner and not shown separately on the original insurance policy.

Are ARPC tier rates applicable to every layer of an excess of loss policy even where some higher layers have no exposure to Australian based risks?

If the layer on which the insurer participates has no Australian exposure and therefore no eligible premium, we would not expect to receive reinsurance premium from that policy. If, however, in the underwriter’s opinion the Australian exposure could breach the deductible of a layer, we would expect the proportion of the premium that relates to that exposure to be reported and reinsurance premium paid to ARPC using the tier rates.

How should I calculate the reinsurance premium due to ARPC?

The premium due to ARPC is calculated as a percentage of a cedant’s gross base premium. However, if a cedant does not “gross up” the base premium by the relevant percentage, it will be left with a lower amount after remitting the reinsurance premium to ARPC.

The following example illustrates this point using the current Tier A rates:

Not Grossed Up

Premium $10,000
Plus 16% $1,600
Gross Base Premium $11,600
Less Reinsurance Premium (16% of gross base premium) $1,856
Balance (remaining for cedant) $9,744

Grossed Up

Premium $10,000
Gross up factor (1/(1-16%) x 1.190476
Gross Base Premium (suggested charge to customer) $11,904.76
Less Reinsurance Premium (16% of gross base premium) $1,904.76
Balance (remaining for cedant) $10,000

Grossed Up with 15% Commission

Premium $10,000
Grossed up factor (1-15%) / 1 – (16% + 15%)) x 1.231884
Gross Base Premium (suggested charge to customer) $12,318.84
Less Reinsurance Premium (16% of gross base premium) $1,971.01
Less Brokerage/Commission (15% of gross base premium) $1847.83
Balance (remaining for cedant) $8,500

The formula for “grossing up” the tier rates is:

Without commission = Gross base premium ($) x 1 / (1 – tier %)

With commission = Gross base premium ($) x (1 – commission %) / (1 – (tier % + commission %))

Section 9 of the Reinsurance Agreement for Terrorism Risks provides that the gross base premium excludes the Fire Service Levy, GST and Stamp Duty.

Please click here to access Excel calculators which may help with your calculations.

Eligible Insurance Contracts

Are forklift trucks or other mobile equipment excluded from the Act?

Regulation 5 of the Terrorism Insurance Regulations 2003 refers to the types of contracts of insurance which are not eligible insurance contracts for the purposes of the Terrorism Insurance Act 2003.

Item 18 of Regulation 5 excludes a contract of insurance for a motor vehicle (other than moveable 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 ‘moveable machinery or equipment, used in the mining or construction activities, that would not ordinarily be requested to travel by road.’

Is an insurance policy covering viticulture trellis systems and the vines they support an eligible insurance contract for the purposes of the Terrorism Insurance Act 2003?

It is likely that a trellis system and the vines it supports would meet the description of eligible property contained in the Act. However, a contract of insurance which provides cover to farm business which does not include cover for business interruption is excluded by the Regulations. Consequently, whether such a policy is an eligible insurance contract will depend on the cover provided in the policy.

Does the scheme cover medical indemnity insurance?

The scheme covers only eligible insurance contracts. A contract of insurance is an eligible insurance contract to the extent that it provides insurance cover for losses that arise in relation to the ownership or occupation of eligible property. While insurers should seek their own advice about whether or not a particular insurance contract is eligible for the purposes of the Act, it would appear on the face of it that medical indemnity insurance does not provide cover for eligible property.

To what extent is an insurance contract which provides cover to parties in a “public / private partnership” consortium an eligible insurance contract for the purposes of the Terrorism Insurance Act 2003?

By reason of the Terrorism Insurance Act 2003 and the Regulations made under that Act a contract of insurance is not an eligible insurance contract to the extent it provides cover to the Crown in the right of a state or territory, or a minister or department of a government of a state or territory. Consequently, an insurance contract which provides cover to the Crown, a minister or a department and a private sector entity is not an eligible insurance contract to the extent that it provides cover to the Crown, a minister or a department, but may be an eligible insurance contract (if it otherwise meets the definition in section 7 of the Act) to the extent it provides cover to the private sector entity.

In an events cancellation policy does an insured have to actually occupy eligible property in order for the reinsurance offered by ARPC to respond to an incident?

For an events policy to be an eligible insurance contract for the purposes of s7(1)(b)(ii) the 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” clearly 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).

Reinsurance Agreement

Is it compulsory for insurers to reinsure terrorism risk through ARPC?

It is not compulsory for insurers to reinsure the risk of eligible terrorism losses through ARPC. 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.

Of course, ARPC offers terrorism reinsurance for all eligible insurance contracts.


Do I have to declare all risk locations even if they are in the same post code?

Yes. This assists with aggregate reporting and, in the event of a Declared Terrorist Incident (DTI), will assist us in claims reporting and auditing.

Why do we have to report both eligible and ineligible Gross Written Premium (GWP) to ARPC once a year?

The ineligible component is required as the entire GWP of the cedant’s Fire and ISR portfolio is being determined and used as a measure of the cedant’s size. The purpose of the submission is to determine the retention. The retention is based proportionally on the size of the company. The reason we ask for the split, rather than just ask for a total figure, is so that the eligible component can be reconciled with that portion of the cedant’s quarterly submissions and (if required) the total can be reconciled with their APRA return (or equivalent).

What elements must be included in the Street Address Detail Aggregate Report, which is due by August 31 each year?

This report has slightly different requirements to the other two aggregate exposure reports. Building exposures are an obvious requirement if they are in an eligible policy but, importantly, a building does not have to be included at risk level. If the eligible policy is only issuing cover for ‘contents’ or ‘business interruption’ in the CBD postcode then these amounts should be submitted on their own.


Does the retention figure apply to each and every loss during a retention period or is it an aggregate deductible?

The retention figure noted in ARPC’s treaty agreement is an annual aggregate retention to be applied during the same retention period.

In cases where a parent insurance company has subsidiary insurance companies can ARPC set one retention for the group?

The Treasurer to Australian Reinsurance Pool Corporation (Risk Retention) Direction (Ministerial Direction) requires ARPC to apply a separate retention to each individual entity which reinsurers with ARPC. The Explanatory Memorandum to the Terrorism Insurance Bill 2003 reinforces the idea that it was the Government’s intention that a separate retention be applied to each individual entity which 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 reinsurers with the ARPC”.

Disclaimer: The Australian Reinsurance Pool Corporation (“ARPC”) is established by section 9 of The Terrorism Insurance Act 2003 (Cth) (“the Act”). The functions and powers of the ARPC are set out in sections 10 and 11 of the Act. The ARPC’s main function is to provide insurance cover for eligible terrorism losses and the ARPC has power to do all things necessary or convenient to be done for or in connection with the performance of that function. In the performance of that function, the ARPC will enter into discussions with insurers concerning the provision by the ARPC of reinsurance cover for eligible terrorism losses. The ARPC does not hold itself out as providing legal advice to insurers or the public in relation to the interpretation, construction or application of the Act and does not do so. The ARPC provides general information on its website, in its publications and in the course of its dealings with insurers about the Act, the regulations made pursuant to the Act and ARPC’s Reinsurance Agreement for Terrorism Risks. That information does not constitute legal advice. Insurers dealing with or proposing to deal with the ARPC should obtain their own legal advice, if that is considered necessary, for the purpose of making decisions.