Pool Re, the terrorism reinsurance pool, today announces that, from April 2018, it will extend its cover to include material damage and direct business interruption caused by acts of terrorism using a cyber trigger. The cover, which will exclude intangible assets, will be offered as standard to all policyholders which purchase terrorism insurance from Pool Re Members.
This initiative is the culmination of more than two years of work. The coverage extension is based upon a research study which was commissioned from the Centre for Risk Studies at University of Cambridge Judge Business School, to further Pool Re’s understanding of the nature of the cyber terrorism threat.
Julian Enoizi, Chief Executive, Pool Re, said: “We will continue to evolve our coverage and today’s announcement is an effort to future proof the Scheme and to close a potential gap in coverage before it became apparent.
“The threat from a cyber-attack is evident and businesses have become increasingly concerned about the extensive repercussions these types of attacks could have on them. This was a clear gap in our coverage which left businesses potentially exposed. After rigorous analysis, we determined that we can close this gap. It is a pivotal moment for Pool Re which establishes a new standard for terrorism cover and places the UK at the forefront of nations reinforcing their economies against emerging risks. It is also an indication of what can be achieved through cross-industry, academic and governmental collaboration. We will continue to research and evaluate other emerging terror threats as they become evident.”
Simon Ruffle, Director of Research and Innovation at the Cambridge Centre for Risk Studies, said the study for Pool Re was very timely given the evolving nature of cyber terrorism. “The Centre has applied an academic approach to modern business, enabling a deep analysis of current geopolitics and technology in order to illuminate the shape of an emerging threat to the UK economy,” he said. “The cyber terrorism scenarios we examined provide insight into what types of attacks might be possible in the next few years that could impact Pool Re’s portfolio.”
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About Pool Re
The Pool Re scheme was set up in 1993 by the insurance industry in cooperation with the UK Government in the wake of the IRA bombing campaign on the UK Mainland with the goal of protecting the economy. Pool Re is a mutual reinsurer whose Members comprise the vast majority of insurers and Lloyd’s Syndicates which offer commercial property insurance in the Great Britain, with membership of the scheme affording them a guarantee which ensures that they can provide cover for losses resulting from acts of terrorism, regardless of the scale of the claims.
The scheme, which is recognised as a leading example of public/private partnership, is owned by its Members but is underpinned by a HM Treasury commitment to support Pool Re if ever it has insufficient funds to pay a legitimate claim. Pool Re pays a fee to Government for this guarantee and would repay the money over time if it ever used this facility.
However, in the event of a loss resulting from an act of terrorism, each Member must first pay losses up to a threshold, which is determined individually for that insurer. When losses exceed that threshold, the insurer can claim upon Pool Re’s reserves, which now stand at approximately £6.2billion. These reserves have been accumulated by the Members of Pool Re since its inception. It is only in the event that these reserves and the company’s commercial reinsurance are exhausted, that Pool Re would require Government support.
The Pool Re scheme has dealt with some 16 separate terrorism events paying losses amounting to in excess of £600m.
Since March 2015, the Pool Re Scheme’s resilience has been augmented by an external reinsurance placement. This re-engages the global market in aggregated UK terrorism for the first time since 1993, and additionally provides protection to both Scheme assets and the UK taxpayer.
Pool Re is also a founding member of the International Forum of Terrorism Risk (Re)Insurance Pools (IFTRIP). Established in 2016, IFTRIP is aimed at fostering closer ties and allowing for greater collaboration between the world’s terrorism (re)insurance entities. IFTRIP is comprised of national terrorism reinsurance pools from twelve countries.
About the Centre for Risk Studies at the University of Cambridge Judge Business School
The Centre for Risk Studies is a multidisciplinary centre of excellence for the study of the management of economic and societal risks. The Centre’s focus is in the analysis, assessment, and mitigation of global vulnerabilities for the advancement of political, business and individual decision makers.
The Centre provides frameworks for recognising, assessing and managing the impacts of systemic threats. The research programme is concerned with catastrophes and how their impacts ripple across an increasingly connected world with consequent effects on the international economy, financial markets, firms in the financial sectors and global corporations. To test research outputs and guide new research agendas, the Centre engages with the business community, government policy makers, regulators and industry bodies.