A review of Australia’s terrorism reinsurance pool says the scheme should continue, but has rejected a proposed extension to include cyber terrorism.

The Australian Reinsurance Pool Corporation (ARPC) was set up in 2003 so the Government could provide financial guarantees following a global withdrawal of terrorism insurance after the September 11 2001 attacks on the US.

The legislation behind it is evaluated every three years, and Treasury today published its report following this year’s review.

“The review assesses that there would be an ongoing market failure in the Australian terrorism reinsurance market in the absence of the scheme,” Assistant Treasurer Stuart Robert said.

There will be no changes to scope or pricing of the scheme, and calls for an extension to include cyber terrorism have been rejected.

ARPC CEO Chris Wallace has previously said cyber terrorism is a “real gap” in insurance coverage. The pool is also carrying out a year-long research program into the issue.

But the review found the current risk of terrorist groups using a cyber-attack to hit Australia is low.

“Cyber terrorism is an emerging risk and there is yet to be a clear and evident market failure in relation to physical property damage from cyber terrorism requiring government intervention,” the review says.

Dr Wallace told insuranceNEWS.com.au he welcomes the decision to continue the scheme, and supports the review’s recommendations.

“This is good news for the Australian business sector, the insurance industry and the broader Australian economy, which would rely on this coverage to recover from the effects of a declared terrorist incident,” he said.

“We have raised the [cyber] issue and it will continue to be monitored. The research we are carrying out will help the Government to understand the exposure and the risk.

“It is an emerging risk. Terrorists probably do not have the capability [to carry out a cyber terror attack] at this stage.”

The amount of compensation the ARPC pays to Government for the provision of a $10 billion guarantee has reduced.

The scheme will pay the Government $100 million a year for the next three years, down from $147.5 million in 2017/18.

“The amounts have been reviewed by the Australian Government Actuary and are appropriate,” Dr Wallace told insuranceNEWS.com.au.

Click here to see the full report.