Pool Re launches SME scheme to close terrorism protection gap

Pool Re has launched a new incentive scheme to encourage insurers to include terrorism cover as standard within SME property policies, in a move aimed at strengthening economic resilience.

The initiative, effective from 1 April, offers discounts on reinsurance costs for member insurers that reintegrate terrorism cover across part or all of their SME portfolios.

The scheme is designed to address a significant protection gap, with only around 4% of UK SMEs currently purchasing dedicated terrorism insurance cover, despite representing 99% of the UK business population.

Under the proposal, participating insurers must embed terrorism cover as a non-removable component of SME property policies to qualify for discounted reinsurance pricing.

The new development comes one year after Pool Re, the British Government’s public-private reinsurer for terrorism risk, ultimately backed by UK Treasury, switched over its operating model from providing terror cover on a facultative basis to a treaty reinsurance basis.

Pool Re said the new SME approach is intended to ensure meaningful uptake, particularly as many smaller businesses mistakenly believe terrorism cover is already included in standard policies.

The reinsurer is urging members to take advantage of the scheme to normalise coverage across the SME segment, which has remained exposed since terrorism exclusions became standard following the 1992 Baltic Exchange bombing.

Tom Clementi (pictured), CEO of Pool Re, said the initiative is focused on both coverage and resilience.

“Enhancing terrorism protection for SMEs is not only about closing an insurance coverage gap, it is about strengthening national economic resilience in a world where the terrorism risk landscape continues to evolve,” he said.

“This scheme gives our Members an additional incentive to offer terrorism cover as standard, as was the case prior to the formation of Pool Re in 1993,” he continued.

“With no material financial burden placed on SMEs, we hope the scheme will lead to a significant uptick in coverage across the economy,” Clementi added.

Lucy Rigby, economic secretary to the treasury, said the programme could drive meaningful change in the market.

“Pool Re plays an important role in supporting the UK’s economic resilience, and this incentive scheme delivers real market change for the UK’s SMEs,” she said.

“The Government stands ready to support efforts to strengthen the resilience of UK businesses, and we encourage Pool Re’s Members to make the most of this excellent opportunity to expand their SME coverage offering,” Rigby added.