Government terrorism pools set up following the September 11 2001 attacks on the US remain “integral risk management tools”, according to global reinsurance broker Guy Carpenter.

Schemes including the US Terrorism Risk Insurance Act (TRIA) and the Australian Reinsurance Pool Corporation (ARPC) have come under growing scrutiny as capacity returns to private markets.

TRIA is due to expire at the end of the year, and while there are proposed extensions before the US Senate and House of Representatives, time is running out for them to be implemented.

Locally, a recent Audit Commission report suggested abolishing the ARPC, and a Treasury review of its future is pending.

“The current environment of adequate supply in the (re)insurance marketplace has led some to question government involvement in providing cover for terrorism and whether there is an opportunity for the private market to provide additional capacity,” Guy Carpenter says.

It concludes that government involvement is necessary in some countries “to support the terrorism market’s unique characteristics and requirements”.

Guy Carpenter has previously stated that the reinsurance sector does not have enough capital to withstand high-loss scenarios. For example, a nuclear bomb detonated in Manhattan gives a modelled loss of $US900 billion ($964 billion), while dedicated global capital to the US (re)insurance market is estimated at $US700 billion ($750 billion).