Tailored retentions can include CBRN threats, cyber physical damage, as well as conventional risks, under the new ‘bifurcated approach’ adopted by the UK’s Treasury-backed reinsurance pool for terrorism risk in mainland Great Britain.
Pool Re has announced the successful completion of its transition to a modernised catastrophe treaty reinsurance scheme.
For “non-conventional” terrorism risks, Pool Re’s new bifurcated approach offers its members more flexibility by allowing them to select tailored retentions.
These comprise chemical, biological, nuclear, radiological (CBRN) as well as cyber physical damage and conventional risks, Pool Re highlighted.
The public-private terrorism reinsurance pool said that “with support of members, regulators and HM Treasury”, its new scheme will better serve members “addressing the evolving and increasingly complex terrorism threat landscape”.
Pool Re cited benefits of its modernised reinsurance scheme to drive market innovation and strengthen terrorism resilience.
The switch to a treaty reinsurance model from a previous facultative risk by risk transfer basis was originally announced in March 2024.
The changes, Pool Re said, provide its members with greater freedom to underwrite commercial property damage and business interruption caused by acts of terrorism in line with their own risk appetite and underwriting strategy.
Also cited was greater flexibility to price risks for policyholders, “which we hope will encourage higher adoption among smaller businesses and those currently without protection”.
New arrangements do not involve any changes to the fundamental rules of Pool Re’s scheme, or the terrorism coverage provided, “which will remain unlimited, excess of a member’s retention”, the reinsurer said.
“At Pool Re, we are transforming our reinsurance scheme to serve our members better in the face of an evolving threat landscape and a changing insurance marketplace,” said Tom Clementi, Pool Re’s CEO.
“These changes are designed to create opportunities for the insurance sector to take greater ownership of terrorism risk and to normalise the market over time,” he said.
Key benefits as defined by Pool Re:
- Adapting to the changing nature of terrorism risk – Leveraging advanced technology to model and price terrorism risk with greater sophistication, Pool Re is better able to serve its members and help them to address both low-sophistication, easier-to-model attacks as well as more complex threats.
- Increasing take-up of terrorism cover – The new treaty will allow members to underwrite and distribute terrorism cover more easily and in line with their own risk appetite and strategy, removing unnecessary bureaucracy.
- Returning risk and premium to the insurance market – Pool Re’s new bifurcated approach offers members greater flexibility by allowing them to select tailored retentions for non-conventional terrorism risks, which comprise CBRN and cyber physical damage; and conventional risks.
Jonathan Gray, Pool Re’s chief underwriting officer, continued: “This transformation was made possible through strong collaboration with our members, who played a crucial role in shaping the new scheme.
“In this first renewal, member insurance companies have shown an increased interest in refining their risk appetite for terrorism, with many assuming more risk through higher retentions.”
Clementi added: “This new scheme reflects our commitment to resilience and adaptability by delivering the sophistication, simplicity and flexibility required to achieve our goal of protecting businesses as well as the British taxpayer against an ever-changing terrorism threat.”
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