Pool Re completes £2.475 billion terrorism retrocession placement
Pool Re, Britain’s leading terrorism reinsurer, has completed placement of its three year £2.475 billion retrocession programme with 56 international reinsurers. The placement is led by Munich Re with Hannover Re and Fidelis among those providing significant capacity.
Reflecting the underlying insurance provided by Pool Re through its member insurers, the retrocession covers property damage arising from nuclear, biological, chemical, and radiological attacks (CBRN); those arising from cyber-triggered terrorist losses; as well as conventional terrorist acts.
The retrocession is structured as an aggregate excess of loss treaty which will respond if Pool Re’s losses, individually or in aggregate, exceed £400 million in any year, after member insurers’ combined retention of £250 million per event or £420 million in aggregate. The £2.475 billion is an increase from £2.4 billion in 2019 and includes £75 million provided under Pool Re’s existing ground-breaking terrorism catastrophe bond.
Steve Coates, Pool Re’s chief underwriting officer, said: “Despite a difficult market we were delighted to achieve flat pricing for this important placement. Through our Solutions offering, Pool Re has invested significantly in data and analytics over recent years with a focus on modelling of CBRN risks, which is particularly relevant in light of the pandemic. Reinsurers know that we have a strong focus on risk management through our research, and combined with their view of the terrorism market as a sensible diversification away from pure natural catastrophe risk, this means that we were able to engage with a number of new markets and achieve a very positive result.”
Kevin Fisher, chairman of UK, specialties and North America at Guy Carpenter, commented: “Pool Re has achieved wide support in sourcing capacity for its retrocession programme, with coverage being provided by existing and new markets. Their technical expertise and emphasis on data analysis contributes to strong relationships across the market and Guy Carpenter is pleased to have worked with Pool Re to achieve this excellent result.”
Julian Enoizi, Pool Re chief executive, said: “A core part of our strategy is to further distance the taxpayer from potential loss and we continue to look for creative and innovative ways to achieve that. Pool Re’s extended retrocession placement is one of the largest reinsurance deals in the world and we have sought to increase the amount we place every year since 2015 as part of our intention to return UK terrorism risk to commercial markets. We are delighted with the outcome for this new three-year placement.”
Graph below shows the structure of Pool Re's retrocession programme:
Authored by Pool Re
Pool Re’s purpose is to enable the UK insurance market to offer terrorism cover to any commercial property that requires it. Central to this is the integration of Pool Re’s cover with the underlying property policy which ensures that there is no gap in the cover provided.
Pool Re was designed to insulate the taxpayer from potential financial losses arising from acts of terrorism. It has achieved this effectively, to date paying £635m in respect of 13 claims arising from certified terrorism events in the UK since our establishment. It has never called on the Government’s guarantee.
By providing foundational stability at a reinsurance level, Pool Re has created an environment for the commercial market to re-establish itself, following the market failure in 1992. This stability creates and sustains access, liquidity and confidence to generate the conditions for the private market to gradually write a growing portion of terrorism risk.
Helping UK businesses build resilience against terrorism risk is a priority for Pool Re who have developed SOLUTIONS an in-house centre of excellence created to support Members and policyholders better understand risk awareness, modelling, and management. They have also invested in a range of initiatives with Government security and intelligence agencies to provide tools such as an information sharing platform.
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