A review by the Federal Treasury office and targeted stakeholders into Australia’s terrorism insurance scheme has recommended that it should continue.

The Australian Reinsurance Pool Corporation (ARPC) administers the scheme, which was established under the Terrorism Insurance Act 2003 in response to a withdrawal of capacity after the September 11 2001 terrorist attacks in the US.

The scheme functions to “replace terrorism insurance coverage for commercial property and associated business interruption losses and public liability claims”.

The latest three-yearly review found that although some commercial and market capacity for terrorism insurance is re-emerging internationally and domestically, “it remains insufficient to cover demand”.

“Furthermore, there is insufficient capacity for individual risks in Australia, with the quantum of commercial market capacity likely to be significantly below the current $13.4 billion scheme operated by the ARPC,” the review says.

It also suggests that the ARPC pricing policy, industry and individual insurer retention levels remain unchanged.

Other recommendations include a reassessment of the scheme’s capacity and the issue of mixed-use high-rise buildings that are not predominantly for commercial use.

There is also a recommendation that the ARPC pay a $400 million initial dividend to the Commonwealth, spread over four years, with the first payment next January.

This recommendation was implemented in last week’s Federal Budget, with an initial $175 million payment and $75 million annual payments thereafter.