Pool Re publishes its fourth Terrorism Threat & Mitigation Report and gives details of proposed cover for Non-Damage Business Interruption
At the City of London launch, the UK police lead for counter terrorism endorses Pool Re’s actions and commitment to build the UK’s economic resilience
Pool Re, the UK’s terrorism reinsurance pool, has today published its annual Terrorism Threat & Mitigation Report, which focuses on the key terrorist events and developments in 2018, with analysis from leading counter-terrorism experts. Alongside the report, Pool Re published new quantitative research into more than 4,300 global terrorist attacks since 2014, as well as outlining plans for its forthcoming non-damage business interruption cover.
The Threat & Mitigation Report is the culmination of months of analysis of the current and future terrorism risk, enabling Members, the wider insurance community and other stakeholders to better understand it. Contributors to the report include the former senior FBI agent, Ali Soufan, and former Government Security and Intelligence Coordinator, Sir David Omand.
For the first time, Pool Re also published a new data set offering important insights in to global terrorism trends since 2014, when the Islamist group Daesh claimed to have established a caliphate. The database documents fields as wide-ranging as targeting, attack methodology and property damage with analysis of the actions of Islamist groups, right-wing and left-wing extremists, as well as other groups.
Julian Enoizi, Pool Re Chief Executive, said: “This statistical capability will strengthen Pool Re’s actuarial and modelling work, ultimately enabling our Members and reinsurers to feel more comfortable with terrorism risk over time, and therefore commit more of their own capital. In turn, this promotes the economic resilience of UK Plc, since awareness is raised and take-up levels increase.”
The latest Terrorism Threat & Mitigation Report comes at the end of a highly significant year for the state-backed reinsurer. Pool Re has successfully extended cover to include cyber terrorism, and awaits approval for legislative changes that will allow it to cover non-damage business interruption. Further, the company continues to roll out tools to help businesses better understand their vulnerability, security best practice, and obtain premium reductions in return for implementing protective security measures.
Speaking at the report launch in the City of London, Assistant Commissioner Neil Basu, the National Lead for UK Counter Terrorism Policing, endorsed Pool Re’s efforts to help mitigate the terrorist threat to the British economy, saying: “Pool Re is providing a huge opportunity to its members to assess, identify and mitigate their security weaknesses – this can only benefit society as a whole by improving the overall level of security, and provides a potential financial incentive to the individual business through the reduction of their insurance premium. I wholeheartedly support Pool Re’s commitment in this area.”
The former Home Secretary Rt Hon Amber Rudd MP also spoke at the report launch, highlighting the importance of public-private partnerships in building resilience to terrorism.
Pool Re today also provided the first details to the assembled Member insurers of the company’s proposals to cover non-damage business interruption (NDBI) once the legislative changes are passed. From that point, Pool Re will be able to cover losses caused when businesses cannot operate because of a wide police cordon even though their premises may not be damaged, as happened in London’s Borough Market in June 2017.
If approved in Parliament, the new NDBI cover will include loss of trade caused by being unable to access, exit or use the insured’s premises because of the actions of the police or another statutory authority when responding to terrorist activity. It will also provide cover for loss of business as a result of a downturn in customer footfall at insured businesses within a mile of a terrorist incident.
Pool Re Chief Executive Julian Enoizi commented: “It’s a testament to the effectiveness of the relationship between government and the private sector that we are about to close a significant terrorism insurance gap for UK business. This gives confidence to the customers in the communities they serve that in the event of a terrorist attack, services can and will continue. All commercial property and business owners will benefit from the proposed cover, particularly small- and medium-sized businesses which are particularly vulnerable to business interruption losses following attacks, as was seen last year in both Manchester and London.”
Notes for Editors
Non-Damage Business Interruption
Currently, Pool Re can cover losses from terrorism only if there is physical damage to a policyholder’s premises. Pool Re has worked with government for a change to the originating legislation, the Reinsurance (Acts of Terrorism) Act 1993 – currently going through parliament – for it to be able to cover losses caused to businesses by an attack like the one at London Bridge, where no premises were actually damaged.
+44 (0)20 7562 4444
About Pool Re
Pool Re was formed in 1993 by the insurance industry in cooperation with the UK Government in the wake of the IRA bombing campaign on the UK mainland. Structured as a commercial reinsurer, Pool Re is a mutual whose member insurers comprise the vast majority of insurers and Lloyd’s Syndicates which offer commercial property insurance in Great Britain. Ceding their terrorism risk to Pool Re affords member insurers a guarantee ensuring that they can provide cover for losses resulting from acts of terrorism, regardless of the scale of the claims.
Pool Re is recognised as a leading example of public/private partnership. It is owned by its Members but is underpinned by an HM Treasury commitment to support the company if ever it has insufficient funds to pay a legitimate claim. In return for that commitment, Pool Re pays a fee to Government and in addition, were it ever to use this support, it would repay the money over time from future premium receipts.
However, in the event of a loss resulting from an act of terrorism, each member cedant 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 £6.4 billion. These reserves have been accumulated by 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.
Pool Re has evolved during the course of its history into a comprehensive ecosystem for reinsuring terrorism risk. Since April 2018, Pool Re has extended its cover to include material damage and direct business interruption caused by acts of terrorism using a cyber trigger. In addition, on 22 March 2018, the Government announced its commitment to amend the 1993 Reinsurance (Acts of Terrorism) Act to enable Pool Re to extend its cover to include non-damage business interruption losses resulting from acts of terrorism, thereby closing a protection gap that had emerged. The amendment to the originating legislation, contained within the Counter Terrorism and Border Security Bill, will if passed ensure a comprehensive response from Pool Re to acts of terrorism in the UK. In both cases, Pool Re is the first of the global terrorism pools to overtly extend its cover to include these threats, demonstrating the strength of public/private partnership in disaster risk financing.
No longer a simple mechanism for providing compensation, today Pool Re partners with various academic institutions in order to better understand the threat of terrorism. In conjunction with its sponsoring of a Professor of Terrorism Risk Mitigation at Cranfield University, Pool Re’s research and analytics department provides threat analysis and modelling to insurers so as to stimulate the commercial insurance market by enabling it to understand, asses and ultimately price terrorism risk with a view to assuming more of that risk over time.
Pool Re also works to increase economic resilience by, for example, providing incentives in the form of premium reductions for end customers who implement protective security measures accredited by the government.
Pool Re is 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 disaster risk financing mechanisms. IFTRIP is comprised of national terrorism risk entities from thirteen countries.
Over its 25-year history, Pool Re has dealt with 16 separate certified terrorism claims totalling £635m (equivalent to £1.54bn adjusted for inflation). Since March 2015, Pool Re’s financial resilience has been augmented by a commercial reinsurance placement. This re-engages the global market in aggregated UK terrorism for the first time since 1993, and additionally provides protection to both Pool Re’s assets, and the UK taxpayer. Pool Re continues to explore the goal of market normalisation by, for example, examining the possibility of a ground-breaking ILS placement.