Analysis of identified gaps in Australia's terrorism insurance environment

Paula Jarzabkowski, Elisabeth Krull

Research output: Other contribution


Since ARPC’s establishment in 2003, the global terrorism environment has continued to evolve. In particular, there has been an increased risk of low-sophistication attacks carried out by lone actors using knives, firearms, and motor vehicles. The experience of relatively unsophisticated attacks overseas has highlighted gaps in insurance cover, such as where business interruption losses have occurred despite the absence of physical damage to property. At the same time, the risk of sophisticated attacks causing catastrophic damage remains unchanged. In 2020, ARPC partnered with University of Queensland Business School to investigate the extent of insurance coverage for losses attributable to acts of terrorism in Australia and potential insurance coverage gaps. This report outlines the impact of six terrorism-based scenarios on the three pillars of Australian society: People, Property and Economic Performance. The scenarios were developed and analysed to identify and illustrate insurance gaps and coverage within the Terrorism Insurance Act 2003 (TI Act 2003) 1 , and its associated Regulations, including broader impacts on market operation and coverage under public schemes of terrorist attacks. All scenarios refer to a Declared Terrorism Incident (DTI), meaning an incident which the Treasurer is satisfied was a terrorist attack after conferring with the Attorney General, and which is declared to be a DTI by the ARPC Minister. While terrorism-related risks are widely covered in Australia, potential insurance gaps and inconsistencies could be identified for each pillar. The overall findings indicate that some types of losses from terrorism are not covered by existing arrangements or are covered imperfectly or inconsistently. At a high-level, these gaps include: Physical property damage caused by cyber terrorism; Business interruption insurance uptake by SMEs; Compulsory Third Party (CTP) motor insurance schemes; Inconsistencies in Workers’ Compensation schemes; Inconsistencies in Victims of Crime schemes; Coverage of State and Commonwealth assets. The purpose of this report, in identifying and presenting these existing gaps, is to inform future discussions on insurance coverage, such as what risks should be covered, and by whom within the commercial or public sector. The report concludes with some recommendations that might inform these future discussions.
Original languageEnglish
TypeIndustry report of the Australian Reinsurance Pool Corporation (ARPC)
Media of outputReport
Number of pages42
Publication statusPublished - Dec 2020


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