Pool Re’s CEO Julian Enoizi has assembled a roster of senior UK industry heavyweights including markets, large buyers/captive managers and lobby groups to advise the terrorism mutual on its Government review, The Insurer can confirm.

Pool Re

Yesterday, the state-backed reinsurer – which has accumulated ~£6.5bn of reserves during its 27 year history – responded to news that a formal Government review will begin by convening a new advisory body representing a broad church of UK Insurance industry representatives.

Pool Re is a mutual owned by its ~150 members, all UK property insurers who cede terrorism risk into the pool

In addition to seven insurance company members, the body – called the Pool Re “Review Advisory Group” – has representation from leading lobbying bodies such as the Association of British Insurers (ABI) AIRMIC, and the Confederation of British Industry (CBI). Insurance buyers are also involved via senior risk manager Laurence Hampton of the Canary Wharf Property Group.

Huw Evans, the ABI’s Director General and Flora Hamilton, the CBI’s Director of Financial Services, are also members of the new group.

Other external members include Aviva’s GI head Colm Holmes; Simon McGinn, general manager, personal & commercial, Allianz UK; Chubb divisional president Sara Mitchell; Ecclesiastical Insurance’s group CEO Mark Hews; HDI Global’s UK & Ireland head Clare McDonald; RSA UK & International CEO Scott Egan; and Zurich UK chief underwriting officer Hayley Robinson.

The insurer participants were selected to represent the different size of Pool Re members with Allianz, Aviva, RSA and Zurich thought to be among the largest cedents to Pool Re. Chubb – with a smaller UK SME portfolio – is likely to be a mid-sized cedent while Ecclesiastical and HDI Global are thought to be active but smaller users of the Pool Re facility.

In a statement yesterday, Pool Re said the review will determine the mutual’s “strategic direction for the next five years”. 

Supported by an unlimited Government guarantee, Pool Re is subject to a formal review by HM Treasury every five years and one was due this year. However, the timing was thought to be flexible and with Covid-19 stretching central government resources and a parallel initiative by the industry to create a Pandemic Re mutual, speculation had grown before yesterday that the process would be delayed.

Pool Re’s new Gov Review Advisory Group...

Pool Re is regarded as a leading example of a public private partnership. It has evolved over time to accommodate new triggers while returning much of the terrorism risk to the private market which is supported through its Pool Re Solutions arm – a quasi-consultancy designed to assess, model and manage terrorism risk so as to facilitate the return of more of it to the commercial market. In addition to its large reserve pot, it buys the industry’s largest xol cat terrorism program (£2.4bn) and recently pioneered the first terrorism ILS placement.

Operating to an ambitiously short deadline, HM Treasury has said that it would like the review completed by end Q1 2021. The Insurer understands that the UK Government will shortly announce a “Call for evidence” – in effect a consultation with the industry – that will take place in Q4 2020.

Also yesterday, HM Treasury published the three main objectives and scope of the review which will examine Pool Re in the narrower context of its role as a terrorism reinsurer only rather than the potential to be broadened to include other systemic/uninsurable cat risks, such as pandemics or catastrophic cyber attack. 

The last review – in 2014-15 – saw the UK Government hike the premium paid by the mutual for its guarantee five-fold. As a consequence, Pool Re has paid HM Treasury ~£450mn in 2018-20 – almost as much as it had distributed in the previous 20+ years.

However, the expectation this time round is that the review will likely focus on structural changes such as Pool Re liberalising its rules in relation to its members by allowing them greater freedom on pricing and retentions. This idea – according to a Strategy Document Pool Re published in 2019 – will be to stimulate more risk retained by the commercial market while also facilitating greater take-up in the SME sector.

The review also comes as the mutual prepares to discover what a closer relationship with Whitehall will mean after being recently classified as a Government body by the Office of National Statistics (ONS). 

The Insurer comment

A broad church advisory group is a shrewd idea. The UK insurance industry often struggles to talk with one voice - especially so to Government - and this move could ensure a greater unity of approach. Fuelled by the Covid-19 crisis, HM Treasury has received a number of different approaches over how to respond from various insurer constituents. None of these appeared joined up.

Naturally, Pool Re – with its vast reserves – has often been at the centre of these ideas. While not in scope, the Pool Re review may still be an avenue for the UK industry to discuss with Government about how it intervenes in the reinsurance market in the future and ensures that such interventions apportion the risk appropriately between the public and private participants.

If the group contributes to greater unity then that has to be a positive both for Pool Re and the industry as a whole…