UK’s terrorism reinsurer Pool Re has launched a consultation process with its members about moving its reinsurance scheme to a catastrophe treaty reinsurance model.
According to the announcement, this would be the start of a process examining a move to a more contemporary way of providing cover to an insurance market that has changed significantly since Pool Re’s scheme was set up in 1993.
Tom Clementi, Pool Re’s CEO, commented: “Central to Pool Re’s success has been its ability to evolve whilst still delivering on its core purpose of providing confidence and resilience to the UK economy in the event of a catastrophic terrorist event.
“We have been discussing the idea of changing the way we provide terrorism reinsurance since 2018 and we believe there is a broad consensus that change would help deliver a scheme that better deals with the contemporary threat and is fit for the modern insurance marketplace.
As part of this treaty model, there is an intention of dividing terrorism between conventional and non-conventional risk, to enable members to increase retentions for conventional terrorism.
By doing so, risk would be returning to the private market, without taking on any additional exposure to CBRN or cyber-triggered terrorism.
Clementi added: “Our twin objectives of returning more risk to the private market and driving greater awareness and penetration of terrorism cover, especially amongst SMEs, inform the proposal for a switch to a treaty reinsurance model. This should simplify the way in which our scheme operates and give members the flexibility to price terrorism cover for their policyholders as they see fit.
“We hope this could also encourage the reincorporation of terrorism into many standard property packages. For most non-urban risks this could likely be achieved at little or no extra cost, a change which could see many more SMEs protected against terrorism up and down the country.”
Running until the end of October 2022, the consultation will collect feedback from members, capture any issues involved in the change and highlight potential alternatives. The process will involve detailed dialogue with members throughout.
Additionally, it will also require Pool Re to work closely with its regulators, HM Treasury and other stakeholders and will ultimately be subject to the approval of members and HM Treasury.