HM Treasury has confirmed that it will begin the latest five-year review of Pool Re, the insurance industry’s mutual for insuring terrorism risk in Great Britain.
Conducted in liaison with Pool Re itself, as well as stakeholders across Whitehall, the Treasury will also consult with the UK (re)insurance sector in order to complete the review.
To support this process, Pool Re has appointed a new Review Advisory Group, consisting of chief executives from both large and small member insurers, captives and other stakeholders – the group will represent the interests of customers and the wider insurance industry.
The review, which will be reported to the economic secretary to the Treasury, aims to ensure the good functioning of the UK’s terrorism (re)insurance market, agree Pool Re’s strategic direction for the next five years and see that public interest is properly protected.
The Treasury plans to publish a consultation document to this effect in late 2020, calling for evidence from interested parties. The corresponding report document, outlining the review findings, will be published in the spring of 2021.
Changes to date
HM Treasury last reviewed Pool Re in 2014 – since then, a number of changes have been actioned, for example the inclusion of cover for non-damage business interruption (BI) resulting from terrorist activity, the extension of cover to include physical damage caused by cyber terrorism and pricing improvements to better reflect policyholder risk.
Pool Re added that since 2014, member retentions have increased, aligning with its objective to return risk to private markets. Furthermore, it has built “the world’s largest terrorism retrocession programme, including an ILS layer, the first of its kind”. These measures aim to spread risk to the commercial markets and insulate UK taxpayers from potential liabilities from terrorism losses.
In 2019, Pool Re Solutions was launched – this provides analysis and advice to members and their policyholders on terrorism risk awareness, risk modelling and risk management. Plus, in February 2020, the Office for National Statistics (ONS) confirmed that Pool Re would be classified to the central government subsector.
The new review, therefore, will also ensure that requirements for central government bodies are met without compromising Pool Re’s ability to operate.
Julian Enoizi, chief executive officer of Pool Re, said: “Behind Pool Re’s success as a public private partnership is our close cooperation with both Her Majesty’s Treasury and our members. This cooperation ensures that we continue to provide the most relevant, affordable coverage against terrorism loss while facilitating the long-term return of terrorism risk to private markets.
“We welcome this latest review as an opportunity to further develop our strategy to stay ahead of the evolving risk environment and to add increasing value to our members and their policyholders.”