Pool Re, a British government-backed terrorism reinsurer, has announced that its members and HM Treasury have backed the formal proposals from its Board to transform the current Pool Re scheme after more than two years of engagement and consultation.
Through these approvals, Pool Re aims to pave the way for modernising to an aggregate catastrophe excess of loss treaty to ensure the scheme remains relevant and is fit for purpose in the digital age.
The proposal aims to create conditions necessary to support members in driving greater take-up of terrorism cover, returning risk to the private market, further distancing the taxpayer from the financial consequences of acts of terrorism, and bolstering the resilience of the UK economy.
There will be no changes to the fundamental rules of the scheme and the coverage provided. However, the proposal will be tweaked to allow for more flexibility to underwrite terrorism commercial property damage and business interruption risks in line with their strategic priorities and risk appetite.
Tom Clementi, Chief Executive Officer, Pool Re, commented, “Members and HM Treasury have given Pool Re a very clear and exciting mandate to continue Pool Re’s modernising journey. 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.”
In April 2025, Pool Re’s proposals to convert its reinsurance arrangements from the current facultative obligatory treaty to an annual aggregate catastrophe excess of loss treaty will take effect. This modernisation is a core element of the ‘Scope of Works’ programme agreed upon by members and HM Treasury following the last review of Pool Re by the government which concluded in March 2022.
The transformation to an aggregate treaty basis will involve the updated scheme to provide members with reinsurance cover priced more sophisticated and risk-reflectively.
Members’ reporting obligations will be simplified, with members-only required to provide an annual exposure return, reducing their administrative burden. Choice and flexibility built into the new treaty arrangements will allow members to choose their preferred retention level, subject to minimum retention specified by Pool Re, and so take on more terrorism risk.
Bim Afolami, Economic Secretary to the Treasury, said: “Pool Re has worked hard on its plan to modernise its reinsurance offering, and I am pleased that Pool Re’s proposals are supported by its members as well as the Government. I look forward to seeing the impact of the change for members, customers and the terrorism insurance market.”
