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Objectives of Australian Reinsurance Pool Corporation

Australian Reinsurance Pool Corporation (ARPC) is a Commonwealth corporate entity established under the Terrorism Insurance Act 2003 (TI Act). It is wholly owned by the Commonwealth of Australia (Commonwealth). ARPC’s vision is to be an effective provider of terrorism risk insurance that facilitates private participation, supports national resilience and reduces losses arising from catastrophic events caused by terrorism.

ARPC provides commercial property insurers with reinsurance for commercial property and associated business interruption losses arising from a Declared Terrorism Incident (DTI). The TI Act renders terrorism exclusion clauses in eligible insurance contracts ineffective to the extent that the loss or liability is an eligible terrorism loss arising from a DTI.

The ARPC board is the accountable authority for the purposes of the Public Governance, Performance and Accountability Act 2013 (PGPA Act). ARPC has the power to do all things necessary in connection with the performance of its functions. The continued existence of ARPC in its present form and with present programs is dependent upon Government policy.

The basis of preparation

The financial statements are general purpose financial statements and are required by section 42 of the PGPA Act 2013.

The financial statements have been prepared in accordance with:

a) Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and

b) the Australian Accounting Standards and Interpretations – Reduced Disclosure Requirements issued by the Australian Accounting Standards Board that apply for the reporting period.

The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except for certain assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position. The financial statements are presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise stated.

The financial statements have been prepared on the basis that ARPC is a going concern.

New accounting standards

Consistent with Government policy, no accounting standard has been adopted earlier than the application date as stated in the standard.

AASB 16 Leases

AASB 16 became effective on 1 July 2019. This new standard has replaced AASB 117 Leases, Interpretation 4 Determining whether an Arrangement contains a Lease, Interpretation 115 Operating Leases – Incentives, and Interpretation 127 Evaluating the Substance of Transactions Involving the Legal form of a Lease.

AASB 16 provides for a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, together with options to exclude leases where the lease term is 12 months or less, or where the underlying asset is of low value. AASB 16 substantially carries forward the lessor accounting in AASB 117, with the distinction between operating leases and finance leases being retained. The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes in the financial statements.

Application of AASB 16 Leases

ARPC adopted AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2019 is not restated, that is, it is presented as previously reported under AASB 117 and related interpretations.

AASB 16 provides for certain optional expedients, including those related to the initial adoption of the standard. ARPC applied the following practical expedients when applying AASB 16 to leases previously classified as operating leases under AASB 117:

  • Apply a single discount rate to a portfolio of leases with reasonably similar characteristics
  • Exclude initial direct costs from the measurement of right-of-use assets at the date of initial application for leases where the right-of-use asset was determined as if AASB 16 had been applied since the commencement date
  • Reliance on previous assessments on whether leases are onerous as opposed to preparing an impairment review under AASB 136 Impairment of assets as at the date of initial application, and
  • Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application

As a lessee, ARPC previously classified leases as operating or finance based on its assessment of whether the lease transferred substantially all of the risk and rewards of ownership. Under AASB 16, ARPC recognises right-of-use assets and lease liabilities for all leases.

On adoption of AASB 16, ARPC recognised a right-of-use asset and lease liability in relation to the lease of office space, which had previously been classified as an operating lease.

This lease was measured at the present value of the remaining lease payments, discounted using ARPC’s incremental borrowing rate as at 1 July 2019. ARPC’s incremental borrowing rate is the rate at which similar borrowing could be obtained from an independent creditor under comparable terms and conditions. The weighted-average rate applied was 0.98%.

The right-of-use asset was measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

Impact on transition

On transition to AASB 16, ARPC recognised a right-of-use asset and lease liability. Lease incentive was reversed, and the difference was recognised in retained earnings. The impact on transition is summarised below:

1 July 2019

Right-of-use assets – property, plant and equipment


Lease liabilities


Reduction in lease incentive provision


Increase in retained earnings


The following table reconciles the minimum lease commitments disclosed in ARPC’s 30 June 2019 annual financial statements to the amount of lease liabilities recognised on 1 July 2019:

1 July 2019

Minimum operating lease commitment at 30 June 2019


Undiscounted lease payments


Less: effect of discounting using incremental borrowing rate as at the date of initial application


Lease liabilities recognised at 1 July 2019


New and revised Australian Accounting Standards

A number of new and revised Australian Accounting Standards apply to ARPC’s financial statements in later years. ARPC’s assessment of the main effect of these standards on its financial statements is set out below.

AASB 17 – Insurance contracts

AASB 17 establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts issued. It will replace the corresponding AASB 1023 General Insurance Contracts. ARPC will apply the new standard in the 2022-23 financial year. The transition to AASB 17 will have an impact on ARPC’s financial position, however it is not possible to quantify the impact at present.

AASB 2018-7 – Amendments to Australian Accounting Standards – Definition of Material

AASB 2018-7 amends the definition of ‘material’ and clarifies that materiality will depend on the nature or magnitude of information or both. ARPC will need to assess whether the information, either individually or in combination with other information, is material in the context of the financial statements. AASB 2018-7 aligns the definition of ‘material’ across AASB 101 Presentation of Financial Statements and AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors and clarifies certain aspects of the definition. ARPC will apply AASB 2018-7 in the 2020-21 financial year and the expected impact is considered minimal.

AASB 1060 – General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities

AASB 1060 is the new simplified disclosure standard developed by the AASB based in IFRS for small to medium-sized entities. It requires Tier 2 entities to follow the recognition and measurement requirements under Australian Accounting Standards but to apply the simplified disclosure requirements in AASB 1060. This standard will only apply to disclosures. ARPC will apply AASB 1060 in the 2021-22 financial year and is yet to analyse the possible impact of this standard on the financial statements.


ARPC is exempt from income tax by virtue of section 36 of the TI Act. ARPC is subject to Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST). Revenues, expenses and assets are recognised net of the amount of GST except:

  • where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO), or
  • for receivables and payables.


ARPC has insured its operating risks with a number of leading insurers using the brokering services of Aon Risk Services Australia Limited. The insurance coverage includes Directors and Officers Liability, Public and Products Liability, Group Journey Injury Insurance, Corporate Travel Insurance, Cyber Liability and Business Package Insurance. Workers compensation is insured through Comcare Australia.

Outstanding claims liability

The financial statements have not included a liability for outstanding claims (2019: $0).

There were no declared terrorist incidents announced during the reporting period or outstanding claims from incidents in prior periods. Any such declaration must be announced by the Minister after consultation with the Attorney-General.

ARPC considers that there are no significant inherent uncertainties in respect of the liability estimate. Accordingly, ARPC has not established a central estimate and has not, therefore, applied a prudential margin in respect of the outstanding claims liability. This is in accordance with AASB 1023 General Insurance Contracts.

In the event of a declared terrorist incident, an actuary will be engaged to independently assess the outstanding claims liability at the balance date and a liability will be held if it is estimated that claims are in excess of the primary insurers’ deductible.

Net claims incurred

There were no declared terrorist incidents during the reporting period. Net claims incurred from prior year declared terrorist incidents did not exceed the individual primary insurer’s deductible.

Assets backing general insurance liabilities

With the exception of property, plant and equipment and intangibles, ARPC has determined that all assets are held to back general insurance liabilities.

Events after the reporting period

ARPC is not aware of any significant events that have occurred since reporting date which warrant disclosure in these financial statements.