Reinsurance News

ARPC successfully renews $3.475bn terrorism retro program for 2022

9th February 2022 - Author: Luke Gallin

The Australian Reinsurance Pool Corporation (ARPC), which administers the country’s terrorism insurance scheme, has renewed its $3.475 billion retrocession program for 2022 at the same price as the previous year.

Combined with ARPC’s net assets and the $10 billion Commonwealth guarantee, the renewal of the retro program provides scheme capacity of roughly $14 billion in the event of a declared terrorism incident against commercial and eligible property assets.

At the 2021 renewal, ARPC revealed that it purchased an additional $25 million layer of protection at the bottom of its reinsurance tower, which brought down the retention to $225 million from the previous $250 million.

For 2022, ARPC has maintained a $225 million excess and secured the same amount of retro coverage as it did in 2021. The corporation has actually managed to successfully place its 2022 renewal for the same cost as the 2021 program, which, according to its Chief Executive Officer (CEO), Dr. Christopher Wallace, “is an impressive result.”

As our readers will be aware, the retro market, and particularly for catastrophe exposures, was extremely challenging at the Jan renewals amid heightened activity and a desire from providers of protection to shift away from aggregate covers and lower layers owing to the rise in frequency. As a result, many players have adjusted the size of their retro for 2022 to offset the higher costs.

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However, the ARPC’s retro program is one that hasn’t seen a claim recently and the terrorism retro market won’t have seen any significant losses for some time. Add to this the fact ARPC is a regular and respected buyer of retro, and you can start to see how the corporation was able to procure the same amount of retro coverage and retention for the same price.

In the event of a terrorism incident, the $3.457 billion retro program and net assets of the ARPC are the first layers of funding for claims.

Commenting on the latest renewal, Dr. Wallace said: “ARPC’s retrocession program encourages a mix of global and Australian reinsurers to provide terrorism cover for Australian-based property assets, which transfers the risk and protects the Australian Commonwealth Guarantee and Australian taxpayer.

“This year, ARPC worked with our reinsurance advisor AON to simplify the program by converting it to a full multi-year arrangement and renewing at expiring terms.”

To secure the 2022 retro program, Dr. Wallace, alongside ARPC’s Chief Underwriting Officer (CUO), Michael Pennell, met virtually with more than 50 reinsurance firms in key global markets.

“ARPC remains an effective provider of terrorism risk insurance that facilitates market participation, supports national resilience and reduces potential losses arising from terrorism catastrophe,” said Dr. Wallace.

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