The reinsurer’s consultation will run until the end of October 2022

Britain’s terrorism reinsurer Pool Re has today (17 August 2022) begun a consultation process with its members on moving its reinsurance scheme to a catastrophe treaty reinsurance model.

The consultation which will run until the end of October 2022 and will examine a move to a more contemporary method of providing cover to an insurance market that has changed significantly since Pool Re’s scheme was initially set up in 1993.

The consultation will collect feedback from members, capturing any issues involved in the change and highlighting potential alternatives – the process will involve detailed dialogue with members throughout.

As part of the proposed treaty model, Pool Re intends to bifurcate terrorism between conventional and non-conventional risk.

This would enable members to increase retentions for conventional terrorism – returning risk to the private market – without taking on any additional exposure to CBRN (Chemical, Biological, Radiological and Nuclear) or cyber-triggered terrorism.

Tom Clementi, Pool Re’s chief executive, said: “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.”

Transitioning to a treaty model

The process of transitioning to a treaty model will also require Pool Re to work closely with its regulators – HM Treasury and other stakeholders. This will ultimately be subject to the approval of members and HM Treasury.

“Should Pool Re transition to a treaty type mechanism, there will be a number of important changes to the way the scheme works. It is therefore vitally important that we get this right. The views of our members are a critical input into the process,” Clementi continued.

“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.”