An Australian Reinsurance Pool Corporation (ARPC) audit has suggested examining options to minimise premium rises if there is a need to rebuild capital after a terrorist attack.

Avenues could include federal budget funding, or adjusting payments that are made from the ARPC to the Government, the Australian National Audit Office says.

“The scheme could then be strengthened in a way that would minimise the need for premium increases,” it says.

The Audit Office recommends Treasury review options for rebuilding capital “in the context of the amount of premium revenue that has been transferred to government” since the scheme started.

By last June the scheme had paid about $845 million to the Government, including $330 million in “one-off dividends and special contributions” between 2012/13 and last financial year.

Treasury agrees to the concept of a review, but says the Government will need to consider factors including insurance and property markets, whether the likelihood of terrorism events has changed and the response of reinsurers participating in the ARPC’s retrocession program.

“The Government could choose to recapitalise the scheme through several mechanisms including increasing premiums, reducing or stopping payments to the Government or direct equity injections by the Government,” it says.

“However, it would be imprudent to commit to one of these options ex ante.”

The Lindt Cafe siege in Sydney in 2014 is the only declared terrorist incident since the scheme began on July 1 2003. In that case claims made were within insurers’ retention levels, so none were paid from the ARPC

Last financial year 235 insurers bought reinsurance from the ARPC, covering more than 800,000 eligible properties with a combined total value insured of about $3.7 trillion.

In the early years of the scheme, no payments were required by the Government so the ARPC could build its net assets. Payments started in 2011/12.