Members of Pool Re, Great Britain’s terrorism reinsurance pool, have backed formal proposals from the Pool Re Board to change the current Pool Re scheme.
Pool Re’s reinsurance covers property damage arising from nuclear, biological, chemical, and radiological attacks (CBRN), as well as property damage arising from cyber-triggered terrorist losses and conventional terrorist acts, and non-damage business interruption.
Any type of insurer, including captives, that cover terrorism risk in the UK can access the Pool Re reinsurance fund.
A significant number of captives, from domiciles including Gibraltar, Guernsey, Isle of Man, Bermuda, Ireland and Vermont, are members of Pool Re.
The proposals to convert its reinsurance arrangements from the current facultative obligatory treaty to an annual aggregate catastrophe excess of loss treaty will take effect in April 2025.
Pool Re said the changes will create the conditions to support members in driving greater take-up of terrorism cover, returning risk to the private market, and further distance the taxpayer from the financial consequences of acts of terrorism.
“Members and HM Treasury have given Pool Re a very clear and exciting mandate to continue Pool Re’s modernising journey,” said, Tom Clementi, Pool Re CEO.
“When Pool Re was founded some 30 years ago, it was never intended to be a permanent, static, and definitive solution.
“Our job was always to correct a market failure, and to provide opportunities for the industry to take more terrorism risk onto its own balance sheet and normalise the market.
“The change to an aggregate catastrophe excess of loss treaty is the best possible outcome for both members and the taxpayer.”
This modernisation is a element of the ‘Scope of Works’ programme agreed by members and HM Treasury following the last review of Pool Re by the government which concluded in March 2022.
The updated scheme will provide members with reinsurance cover that is priced in a more sophisticated and risk-reflective way, while members’ reporting obligations will simplify, with members only required to provide an annual exposure return.