Three years after the Australian Reinsurance Pool Corporation (ARPC) began writing cyclone risk, the scheme has faced its first real test of scale, and according to its leadership, passed it. Speaking in a recent interview, ARPC’s Dr Christopher Wallace and Mr Cameron Hick lay out how the corporation’s two reinsurance pools, cyclone and terrorism, have performed over the past 12 months, and what lies ahead for both schemes.
The Cyclone Reinsurance Pool began operating in July 2022, with insurers joining from 2023. In the time since, it has moved from a start-up scheme into what the Australian Reinsurance Pool Corporation (ARPC) CEO Dr Christopher Wallace described as a maturing operation, one that has now demonstrated its ability to collect premiums and pay claims under real pressure.
The past year brought that test. Tropical Cyclone Alfred generated the bulk of the pool’s losses, while Tropical Cyclone Narelle added a layer of complexity after it downgraded and then re-strengthened, a scenario specifically addressed in the scheme’s governing legislation.
ARPC’s Chief Underwriting Officer Cameron Hick said the event highlighted the pool’s capacity to manage not just scale but complexity, with recoveries from insurers proceeding without complication even as the storm’s shifting intensity tested how the legislation defined a declared event.
The cyclone pool has now paid out more than $1.3bn in claims since inception. Dr Wallace pointed to the broader financial picture behind that figure: since the scheme commenced, ARPC has collected roughly $2bn in premiums and incurred a similar amount in claims, a balance he said reflects the scheme’s founding design intent.
“During the first four years of operation, the cyclone pool has largely broken even, which was the design intent,” he said, adding that cash claims paid remain lower than incurred losses because payments take time to flow through after an event is declared and reserves are set.
Crucially, that loss experience has not translated into rate shocks. Mr Hick noted there has been no material change to cyclone pricing following any of the pool’s events to date, with rates holding stable. Dr Wallace said this reflects a deliberate choice not to react to short-term loss experience, even as premiums will continue to be refined over time as ARPC gathers more data on risk exposure.
For insurers, the benefits extend beyond pricing certainty. Dr Wallace said ARPC reimburses insurers within an average of nine days of a claim submission, while Mr Hick pointed to the capital relief the scheme provides, freeing up capital that insurers can redeploy elsewhere in their business. ARPC applies a consistent pricing methodology across participating insurers – providing them with access to the pool on consistent terms while allowing them to select and price retail risk according to their own appetite.
The affordability impact has been most visible in the highest-risk wind bands, where average premium reductions have reached 37% since the pool’s introduction – according to ARPC’s latest 2026 Premium Assessment report. Whether that improvement holds, Dr Wallace said, will depend on the long-term sustainability model ARPC is legislatively required to test and publish annually through its Financial Outlook Report.
He noted that the corporation experienced nine declared cyclone events in the last season alone, and that early indicators point to a warmer season ahead, though he stressed that warm sea temperatures are only one of several atmospheric conditions needed for cyclone formation.
Mitigation discounts and the protection gap
Both executives were candid that pricing stability alone will not resolve Australia’s broader insurance affordability challenge. The strongest lever, Mr Hick said, remains the resilience of the building stock itself, and ARPC has built a discount structure directly into its pricing to reward mitigation measures.
Those discounts are underpinned by engineering research conducted with James Cook University’s Cyclone Testing Station, giving the pricing what Dr Wallace called a scientific evidence base rather than an arbitrary concession. As of March 2026, ARPC had provided approximately $9.4m in mitigation discounts, a figure the corporation tracks and publishes regularly. The challenge now, he said, is less about the size of the discount and more about participation, getting more households to undertake the underlying mitigation work so more of them can access it.
ARPC is also building the evidence base around insurance participation and protection gaps. The corporation has published research analysing non-insurance and flood coverage gaps across northern Australia, drawing on what Mr Hick described as a unique data set spanning multiple insurers, something no single participant previously held.
A print and digital awareness campaign was run through the last cyclone season which achieved increased engagement, particularly during and after cyclone events, when households were most actively seeking information on available discounts, according to ARPC. The corporation intends to run a further campaign this coming season and is developing additional consumer-facing resilience resources for its website.
Measuring the discounts’ effect on claims outcomes will take longer. With only three years of claims data and given that Alfred’s losses were concentrated in lower-risk areas where mitigation take-up is lower, Dr Wallace said it remains too early to isolate a clear claims differential between mitigated and unmitigated properties.
Terrorism pool: quiet but far from inactive
Operating since 2003, the terrorism pool draws considerably less public attention than its cyclone counterpart, a gap that Dr Wallace attributed to its focus on commercial rather than household risk. Premiums are calibrated largely around concentration of exposure, with capital city risk priced higher than regional exposure.
Two declared incidents occurred in the past 12 months; neither resulted in a claim against the pool, though he was firm the absence of losses should not be read as an absence of risk. “There is time on risk,” he said, noting that insurers’ reluctance to hold terrorism exposure on their own balance sheets is itself evidence of the risk’s real financial weight.
Mr Hick put a figure on that exposure: roughly $5.4tn in aggregated Australian assets were covered under the pool in the last financial year. Participation remains voluntary, with insurers free to buy private reinsurance instead, but he noted that nearly all commercial insurers operating in Australia have chosen to sign a treaty with ARPC.
Dr Wallace estimated ARPC’s terrorism premiums average around 5% of the total premium insurers charge policyholders for cover that, without the scheme’s legislative override of standard terrorism exclusions, might otherwise be unavailable or heavily sub-limited.
Two pools, one balance sheet
Despite their differing risk profiles, both pools sit within the same corporate structure, and Dr Wallace described them as sharing a common actuarial foundation as property catastrophe excess-of-loss treaties. The modelling diverges from there: cyclone pricing draws on six vendor catastrophe models built from decades of claims history, while terrorism relies more heavily on scenario-based probability judgement for events with limited precedent.
Operating as a single entity allows ARPC to use its balance sheet to manage volatility across both products, he said, a structure reinforced by periodic external review from Treasury, currently conducted at least once every five years.
Mr Hick added that ARPC further protects its terrorism book through retrocession in the commercial reinsurance market, while maintaining close alignment between liabilities and investments to ensure liquidity when claims fall due.
A model for the region
Dr Wallace then spoke about the value of a long-term view; one built into the corporation’s legislative mandate to price for break-even over an extended horizon rather than reacting to short-term loss events in the way commercial reinsurance markets often do. He also acknowledged the inherent tension of sitting between government and commercial priorities, describing it as a structural feature of operating as a public financial corporation rather than a flaw to be resolved.
Mr Hick added that the public-private structure removes the need to service profit margins on capital, a saving that flows through to more cost-effective cover for the community and allows ARPC to place perils that private markets often find difficult to fully underwrite on their own. A