A major bomb attack at the core of a key city remains a threat despite the recent trend towards armed terror assaults, according to the Australian Reinsurance Pool Corporation (ARPC).

Chief Underwriting Officer Mike Pennell presented to the third Cat Risk Management & Modelling Australasia conference in Sydney last week.

He discussed improvements in terrorism modelling and its importance in assessing the country’s exposure.

“When the ARPC started [in 2003] there was no model available,” he told insuranceNEWS.com.au.

“Now we continually run different scenarios through a 3D blast model developed with partners including Geoscience Australia and the Federal Police.”

Mr Pennell says a major CBD blast would create a probable maximum insured loss of $7 billion.

“We need to know this scheme has the capacity to cover similar events in more than one location,” he said.

He says armed attacks, currently favoured by groups such as ISIS, generally result in lower insured losses that could be handled by insurers without recourse to government schemes.

“However, while the lone wolf-type assault is more prevalent currently, the risk of a large explosion has not diminished.”