South Australia is the latest state to take out terrorism insurance after a drop in the cost of cover.

It has a $225 million policy with a panel of international insurers and Lloyd’s syndicates, covering physical loss or damage to government property in a declared act of terrorism.

The annual policy – the premium for which has not been revealed – also includes business interruption cover and comes with a $25 million excess.

Public Sector Minister Michael O’Brien says the move follows a review of policy and pricing options by the state’s insurance broker that found “more favourable” terms.

The policy does not value all the state’s assets at $225 million but expects the Federal Government to cover costs above and beyond damages caused by an act of terrorism.

“The Commonwealth has now stated that terrorism-related events have been added to the Natural Disaster Relief and Recovery Arrangements temporarily, pending a decision on permanent inclusion,” Mr O’Brien told insuranceNEWS.com.au.

The Federal Government must declare an act of terrorism for the policy to take effect.

Insurers covering terrorism risks in Australia can reinsure with the Australian Reinsurance Pool Corporation (ARPC), established in 2003 as a Federal Government backstop after reinsurance market failures following the September 11 2001 attacks.

The ARPC has 246 active treaties and collects $124.7 million in gross written premium (GWP) annually. The majority of its earned premium is spent on retrocession. About 8% of the corporation’s GWP comes from SA.