A broker has criticised the way terrorism pool premiums are calculated and called for reform or even removal of the program.

First Choice Risk Solutions GM Andrew Hudson says the Australian Reinsurance Pool Corporation’s rate-setting method is unfair because it means businesses in CBD postcodes pay the most.

Under the ARPC’s three-tier rate structure, premium rates are determined by postcode based on population density, to reflect risk exposure.

The rate is 16% of base premium for commercial property and business interruption under tier A, which covers CBDs in Australian cities with a population above 1 million.

Tier B has a premium rate of 5.3% and applies to urban areas in all state capitals and cities with a population above 100,000. Tier C has a rate of 2.6% and covers postcodes outside the other tiers.

Mr Hudson told insuranceNEWS.com.au the pricing structure “discriminates against businesses that are in the CBD postcodes or near the CBD. In my view, it’s unfair. I think it needs to be reduced and become more of a flat rate or expanded to include other catastrophes, or abolished altogether, as it’s never paid a claim in over 20 years, from what I can see.”

The Commonwealth-backed pool was established in 2003 to address a global withdrawal of terrorism insurance capacity after the September 11 2001 attacks on the US.

Since then, there has been one declared terrorist incident – the Lindt Cafe siege in December 2014. This resulted in claims against insurers, but no money was paid from the pool because insurers covered the costs from their individual thresholds.

Mr Hudson said: “Some of the CBD buildings that benefit from the scheme may not even purchase insurance that contributes to the pool, while dry cleaners, cafes and small retailers who have had a sharp downturn in revenue are paying the additional amount.

“Some are struggling and we have seen a significant increase in businesses closing in 2025, many saying it’s too hard and they have had enough.”

For businesses in NSW, the 16% rate adds to the state’s emergency services levy on general insurance policies. Mr Hudson, who is based in Cronulla, says the pool premium “has a big effect ... particularly in NSW, more so than anywhere else”.

The Terrorism and Cyclone Insurance Act 2003 mandates that insurers provide cover for terrorism. It is voluntary for insurers to purchase terrorism reinsurance from the ARPC.

An ARPC spokesperson told insuranceNEWS.com.au: “Ultimately, it is up to insurers to determine what premium they charge for the risk, but if they decide to transfer the risk to the pool, then they must pay ARPC a reinsurance premium for that.

“It is not mandatory for insurers to participate at a portfolio level in the terrorism pool, so it could not be considered a tax or levy.”

The spokesperson says there will be a review of the ARPC, its pools and operations later this year, and interested parties will be invited to provide feedback.