Pool Re renews long-standing Guy Carp reinsurance contract following RFP

UK terrorism mutual Pool Re has again renewed its reinsurance broking contract with Guy Carpenter following a competitive tender process, with the Marsh McLennan-owned intermediary handed a three-year mandate with an option to run to five.

  • UK mutual places industry’s largest terrorism XoL treaty at ~£2.5bn limit
  • GC and GC Securities have long-standing role in Pool Re’s treaty and ILS placements
  • Former Pool Re CEO Julian Enoizi named GC’s Europe CEO in September 2023
  • Undertaking major restructure of member reinsurance arrangements from fac to treaty

The move reaffirms the relationship between Pool Re and Guy Carpenter, which has long served as the mutual’s adviser on its terrorism excess of loss (XoL) retro program and £75mn three-year Baltic Re cat bond.

Pool Re – whose former CEO Julian Enoizi was named CEO of Guy Carpenter’s European operations in September – said the renewal will enable the mutual to continue its mission of returning terrorism risk and premium to the private sector, thereby distancing UK taxpayers from future losses.

The state-owned terrorism reinsurer – which benefits from a sizeable reserve fund of almost £7bn – buys the industry’s largest terrorism XoL retro program, having reached a new £2.5bn limit milestone in 2022/23. It is supported by dozens of terrorism reinsurers and is led by Munich Re, with Hannover Re, Validus and Fidelis among those providing significant capacity.

The 1 March renewing placement is structured as an aggregate XoL treaty which will respond if Pool Re’s losses – individually or in aggregate – exceed £400mn in any year.

Amidst the uncertainty in the reinsurance markets 9-12 months ago, Pool Re took up the auto-renewal option at 1 March this year.

Since Pool Re first began buying XoL reinsurance/retro in 2015, it has pursued a strategy of trying to acquire as much limit as possible as part of its strategy of retaining as much risk as possible within the private market. As a consequence, the program is now the largest terrorism pool reinsurance treaty in the industry, surpassing those of France’s GAREAT and the Australian Reinsurance Pool Corporation.

Tom Clementi, CEO of Pool Re, said: “The reinsurance that Pool Re buys is a fundamental part of our effort to find proactive ways to return risk to the market which is, in turn, a pre-condition of the unlimited financial support we continue to receive from HMT.

“Our reinsurance program, which is the largest terrorism reinsurance program in the world and has included two ground-breaking ILS deals, is core to our strategy and we are delighted to have reappointed Guy Carpenter as our reinsurance broker. Guy Carpenter has significant skills and experience in this area and will continue to be an important partner for us.”

Paul Moody, UK CEO at Guy Carpenter, added: “We are delighted to be able to continue our long partnership with Pool Re which has seen the company achieve so much with the support of our terrorism and public sector focused practices. The next few years will once again be pivotal for Pool Re and we are proud that they have chosen to work with Guy Carpenter on this next phase of their journey.”

Pool Re – which in 2020 received government classification as a public sector body in a move which afforded HM Treasury greater central oversight of the mutual – currently underpins around 90 percent of the commercial property terrorism cover in the UK, protecting over £2trn of assets.

It remains to be seen whether Validus – a significant provider of terrorism pool reinsurance capacity – will continue to write the business once its $3bn acquisition by fellow Bermudian RenaissanceRe completes. The latter currently is not understood to be a meaningful writer of terrorism cover for state pools.

The Insurer Comment

Perhaps not a surprise considering what is a long-standing relationship but an important move nonetheless as the UK mutual looks to restructure its own member reinsurance arrangements from fac to treaty and thereby enable greater flexibility in buying arrangements.