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How the scheme is administered


ARPC’s premium and investment income is used to:

  • fund its operations and build a reserve to meet future claims
  • pay retrocession premiums
  • pay any fees and dividends to the Australian Government for the provision
  • of the Commonwealth guarantee, and
  • build the reserve available to meet claims.

The premium charged by ARPC for reinsurance is determined by Ministerial Direction. The tier rates charged by ARPC are shown below.

Tier rates

Premium Tier

Current rate


16% of gross base premium


5.3% of gross base premium


2.6% of gross base premium

The premium tiers have been set by postcode, having regard to the population density in a postcode area. Tier and broad geographical location illustrates the breakdown of the three premium tiers and the broad geographical location to which they relate.

Tier and broad geographical location

Premium Tier

Geographical location


Major CBD areas of Australian cities (Sydney, Melbourne, Brisbane, Perth and Adelaide)


Urban areas of all Australian state and territory cities with a population usually exceeding 100,000 (Sydney, Melbourne, Brisbane, Perth, Adelaide, Gold Coast, Canberra, Newcastle, Central Coast of New South Wales, Wollongong, Hobart, Geelong, Sunshine Coast of Queensland, Townsville, Darwin, Cairns and Toowoomba)


Australian postcodes not allocated to either tier A or B and representing a physical address, as well as any property not on the mainland of Australia or Tasmania, but within the coastal sea of Australia

Reinsurance premiums payable by insurer customers to ARPC are calculated as a percentage of the premium processed by the insurer for eligible insurance contracts. The Scheme provides for tier rates to be adjusted following a claim on the Scheme, enabling ARPC to meet its outstanding claims liabilities and rebuild the claims reserve within an acceptable timeframe.

Retrocession placement

ARPC’s retrocession program continues to provide the following benefits:

  • increases overall scheme capacity
  • positions the Commonwealth further away from the risk of terrorism losses under the Scheme
  • reduces the likelihood that a reduction percentage will be required
  • facilitates inflow of foreign funds to rebuild Australian assets following a terrorism incident, and
  • encourages the return of the commercial terrorism insurance and reinsurance market for Australian risks.

The retrocession program renews on 1 January each year. The 2020 placement of $3.45 billion includes $2.69 billion of capacity written on a multi-year agreement to reduce pricing volatility for ARPC and its retrocessionaires. The multi-year agreement allows adjustment if ARPC’s portfolio changes by more than 10 per cent year-on-year or cancellation if ARPC’s audited forecast premium income reduces by 10 per cent or more.

Retrocession program detail Retrocession program detail
There are currently 71 participants in the retrocession program drawn from the Australian market and from the Lloyds, European, Bermudian, USA and Asian markets. Figure: Retrocession program counterparty credit rating CY 2020 illustrates the split of retrocessionaires by their Standard & Poor’s and/or AM Best credit rating.

Retrocession program counterparty credit rating CY 2020 Retrocession program counterparty credit rating CY 2020

The 2020 $3.45 billion (2019: $3.315 billion) retrocession program was placed in four layers in excess of $250 million (2019: $285 million). Losses which exceed the retrocession program are covered by the Commonwealth guarantee.

Retrocession is placed on a calendar year basis from 1 January. The net retrocession premium expense incurred for the 12 months to 30 June 2020 totalled $62.8 million gross (compared with $59.7 million in 2018-19).