The Australian Reinsurance Pool Corporation (ARPC) has completed its terrorism retrocession arrangements for the 2026 calendar year.

Retrocession is a component of ARPC’s capital and risk management framework, designed to safeguard the terrorism pool’s net assets after a declared terrorism incident by distributing large exposures across multiple reinsurers.

It occurs when a reinsurer transfers part of its assumed risk onward, allowing very large losses to be shared more broadly and strengthening financial resilience.

For the 2026 renewal, ARPC arranged a lower retrocession limit of A$2bn ($1.41bn) and raised the deductible to A$500m.

The structure reflects its assessment of portfolio exposure, reinsurance market conditions and the backstop provided by the Commonwealth guarantee under the Terrorism and Cyclone Insurance Act 2003.

The placement also reflects legislative changes extending the scheme to state-sponsored terrorism, ensuring ARPC’s risk transfer programme matches the broadened coverage scope.

ARPC approached 35 reinsurers in Australian and international markets during the renewal, producing a globally diversified panel for the 2026 programme.

CEO Christopher Wallace said the programme was placed following extensive engagement with global reinsurance markets.

The terrorism pool is backed by ARPC’s accumulated net assets as well as a A$10bn Commonwealth guarantee.

ARPC said the 2026 retrocession cover sits above its retention and is designed to shield the pool’s net assets in severe but plausible loss events.

Wallace said: “Retrocession is a prudent risk management tool that helps protect ARPC’s balance sheet and maintain confidence in the scheme.

“We purchase private reinsurance where it represents value for money and supports the long-term sustainability of the pool. The 2026 placement reflects a disciplined approach in current market conditions.”