The Federal Government will remain the key figure in Australian terrorism insurance for three more years, following a Federal Treasury review of the Terrorism Insurance Act 2003.

Among recommended “refinements” accepted by the Government, the Australian Reinsurance Pool Corporation (ARPC) will continue to collect premiums at current rates, industry retention levels remain at the levels that took effect on July 1 and the ARPC will not be required to maintain a line of credit facility for the scheme, but should investigate the purchase of additional retrocession.

The ARPC has also been charged with examining the effect of extending the scheme to mixed-use, high‑rise buildings that are not predominantly for commercial use.

The Federal Treasury, aided by an outside contractor, will update the allocation of individual postcodes to tiers of risk.

Financial Services Minister Chris Bowen says there is an underlying shortage of reinsurance capacity for individual terrorism risks at affordable prices.

“This situation has remained relatively unchanged since 2006, despite some limited signs of recovery prior to 2008,” he said.

“Since the end of 2008, the global financial crisis has produced an unprecedented fall in reinsurance and insurance capital.”

The scheme was set up in response to the withdrawal of capacity that followed the September 11 2001 terrorist attacks in the United States.

A report by global reinsurance broker Guy Carpenter this year shows governments are becoming increasingly involved in developing terrorism insurance programs, although in some countries governments continue to offer no support.