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ARPC operating surplus rises above forecast

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The Australian Reinsurance Pool Corporation (ARPC) has reported a better-than-expected operating result of $84.9 million due to rate increases in underlying commercial insurance premiums.

The ARPC annual report tabled in Federal Parliament says the result was $29.5 million above forecast for the year ended June 30.

Gross written premium rose to $258.1 million from $234.3 million the previous year, with 237 insurer customers covered for terrorism risk under commercial property and business interruption policies.

“During the year, ARPC continued to observe increases in commercial insurance premiums

in the private insurance market, while global capacity for terrorism risk reinsurance remained stable,” CEO Christopher Wallace says in the report.

The pool has funding capacity for claims of $13.7 billion, supported by the $10 billion Federal Government guarantee, $3.475 billion retrocession reinsurance cover and $595 million in net assets.

The ARPC is awaiting the conclusions of the 2021 Triennial Review, which is considering whether the risk of cyber terrorism causing physical property damage should be included in the pool.

Dr Wallace says the ARPC also remains ready to support a proposed cyclone reinsurance pool, “which is subject to the Treasury-led taskforce recommendations and further Government consideration”.

The average price of ARPC terrorism reinsurance cover for insurers last financial year remained 4.9% of premium.

The annual aggregate deductible held by insurers ranges between a minimum of $100,000 and a maximum of $12.5 million, which ARPC says is low compared to their natural catastrophe reinsurance retentions.

ARPC made a $100 million payment to the Government in fees and dividends last financial year.