Pool Re today welcomed the Government’s commitment to amend the 1993 Reinsurance (Acts of Terrorism) Act to enable it to extend its cover to include non-damage business interruption losses resulting from acts of terrorism.
The reinsurer is currently restricted by the 1993 Act only to pay out if physical damage has occurred to commercial property. This means that businesses, inside a police cordon, that suffer financial loss through being unable to access their property or to trade, are only covered if there has been physical damage during a terrorist attack.
Pool Re had identified the potential protection gap as a result of the spate of attacks across Europe in 2015/6. However, the terrorist attacks in Westminster, Manchester and London Bridge highlighted the actual impact of the gap in UK provisions for terrorism insurance coverage. This caused Pool Re to suggest its cover evolve to ensure continued efficacy in the face of a changing threat. It has already responded to the threat of a cyber trigger and from April 2018 Pool Re will extend its cover to include material damage and direct business interruption caused by acts of terrorism using a cyber trigger.
Julian Enoizi, chief executive, Pool Re, said: “We welcome and applaud the Government’s commitment to amend the 1993 legislation to allow Pool Re to be the first of the global terrorism pools to overtly extend its cover to include terrorism related non-damage business interruption.
“After months of extensive collaboration between ourselves and the Government, today’s announcement represents another landmark moment for the insurance industry’s ability to provide a comprehensive response to acts of terrorism in the UK and demonstrates the strength of public/private partnership in disaster risk financing.
“This amendment will close the terrorism insurance gap for businesses up and down the country, which, combined with our efforts to make cover more affordable for SMEs and regional businesses across Great Britain, will increase the resilience of the economy. Businesses can be confident they will be covered in the event of a terrorist attack, and able to get back on their feet quickly for the benefit of their community, customers and suppliers.
“Pool Re will continue working in partnership with the government to increase resilience in the economy by influencing mitigating behaviour and incentivising implementation of government accredited protective security measures. With the recent launch of our on-line vulnerability self-assessment tool, we commit to making those resources available to smaller businesses”
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 Members comprise the vast majority of insurers and Lloyd’s Syndicates which offer commercial property insurance in Great Britain. Ceding 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 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 £6.5 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. From April 2018, Pool Re will extend its cover to include material damage and direct business interruption caused by acts of terrorism using a cyber trigger. Moreover, no longer a simple mechanism for providing compensation, today it partners with various academic institutions so as to better understand the threat of terrorism. In conjunction with its sponsoring of a Professor of Terrorism Risk Mitigation at Cranfield University, through its research and analytics department, it provides threat analysis and modelling so as to stimulate the commercial insurance market by allowing member insurers to understand terrorism risk with a view to assuming more of it themselves over time.
Pool Re also partners with the Home Office 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.
Over its 25 year history, Pool Re has dealt with 16 separate certified terrorism claims totalling £635m. 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 ways to achieve this goal by, for example, exploring the possibility of a ground-breaking ILS placement.
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.