Pool Re, the UK’s government-supported terrorism reinsurer, has received approval from its members and the HM Treasury to overhaul the current Pool Re scheme.
The proposed modifications, set to take effect in April 2025, maintain the core principles and coverages of the scheme but introduce enhanced flexibility for members in underwriting terrorism-related commercial property damage and business interruption risks.
This flexibility aligns with members’ objectives and risk appetites, including conditions that encourage broader adoption of terrorism insurance, shift risk back to the private sector, reduce taxpayer exposure to terrorism-related financial impacts, and strengthen the UK economy’s resilience.
Key aspects of the transformation include shifting from the current facultative obligatory treaty to an annual aggregate catastrophe excess of loss treaty. This change is part of the “Scope of Works” program, which emerged from the last government review of Pool Re concluded in March 2022.
The transition will feature more sophisticated and risk-reflective pricing, simplified reporting requirements for members, and greater autonomy in selecting retention levels, subject to a minimum set by Pool Re. The approach aims to encourage members to assume a larger portion of terrorism risk.
The reinsurer also explained that the endorsement marks a significant step towards implementing a contemporary aggregate catastrophe excess of loss treaty aimed at making the scheme more adaptable to the demands of the digital era.
“When Pool Re was founded some 30 years ago, it was never intended to be a permanent, static, and definitive solution,” Tom Clementi, CEO of Pool Re, said. “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 normalize the market. The change to an aggregate catastrophe excess of loss treaty is the best possible outcome for both members and the taxpayer.”
“Pool Re has worked hard on its plan to modernize its reinsurance offering, and I am pleased that Pool Re’s proposals are supported by its members as well as the Government,” secretary to the Treasurer Bim Afolami said. “I look forward to seeing the impact of the change for members, customers, and the terrorism insurance market.”
The development of the new scheme structure followed over two years of discussions and consultations with members and HM Treasury, indicating a collective effort to refine and enhance the UK’s terrorism reinsurance framework.
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