Treasury discussions ongoing but 31 March deadline expected to be pushed back
Key is not to be bound by rules inappropriate for a commercial entity, Enoizi says
Ongoing review examining whether benefit from shifting from facultative to treaty model
May also be need to bifurcate the risk to consider different types of terrorism
In the first part of an interview with The Insurer TV, Enoizi said it was vital that Pool Re was “not constrained in any way by rules which aren’t necessarily appropriate to a commercial entity”.
Pool Re was formally classified as a government body just under a year ago, a move which raised questions about the long-term future of the reinsurance backstop.
At the time Pool Re secured a 13-month derogation agreement – officially set to end on 31 March 2021 – to allow discussions to take place over how Pool Re operates.
“It is unfortunate, and not something we were expecting, after 27 years operating as an independent private body, having never called on our government guarantee and built quite a buffer that protects government and taxpayer,” Enoizi said.
“We are highlighting to the Treasury the independence of thought and action that we need to retain if we are to continue to provide the UK economy with the protection we have afforded it so far”
“We are working hard to ensure that as we transition into an arm’s-length government body that we retain some of the ability to act innovatively and creatively so we can continue to find solutions, and are constrained in any way by rules which aren’t necessarily appropriate to a commercial entity.
“We are highlighting to the Treasury the independence of thought and action that we need to retain if we are to continue to provide the UK economy with the protection we have afforded it so far,” he said.
Enoizi said he believed the Treasury shared a desire for Pool Re to be successful, with discussions focused on how this goal can be best achieved to serve the interests of both government and Pool Re’s members.
“The Treasury also wants to look at moving from an unlimited guarantee to one that has a cap imposed on it, and what the implications of that are”
The UK government launched a full review of Pool Re in September last year, which is set to complete in late spring. As The Insurer revealed this week, the initial target date of 31 March is now unlikely to be met, and Enoizi confirmed he expected the derogation agreement over the company’s classification as a government body to be extended in line with the review.
Enoizi said the ongoing review was “much more fundamental and wide-ranging” than the most recent review five years ago.
“This is an opportunity to look at some of the rules that underpinned the scheme when it was set up 27 years ago and whether those rules still remain appropriate,” he said.
“The review is also looking at whether the facultative model we have employed for all that time should now be changed to a treaty model.”
Enoizi said there are reasons this could be beneficial for Pool Re’s members, particularly through giving back control so they can retain more risk if they desire, as well as increasing take-up for small and medium-sized enterprise risks.
He said the review was also examining whether there was a need to bifurcate the risk, and consider conventional and non-conventional terrorism in a different way.
“The Treasury also wants to look at moving from an unlimited guarantee to one that has a cap imposed on it, and what the implications of that are.”
Enoizi said discussions are also focused on the definition of terrorism, with risk having evolved significantly since the reinsurer was launched in the early 1990s in response to a series of IRA attacks.
“If you read the 1993 definititon of terrorism, I can almost see an Irish Republican flag sitting behind it,” he said.
“Whereas today, we have moved beyond that and now have Islamic extremism, far-right extremism, far-left extremism, and also need to consider what happens with climate activism, Black Lives Matter activism, as well as looking to the future at what happens with state-sponsored actions.”
Click the link below to watch Part One of The Insurer TV’s exclusive interview with Pool Re CEO Julian Enoizi, which focuses on the government’s review and the pressures on the £6bn+ public-private carrier.
Part Two will be published on Friday (19 February) where we discuss the future outlook for state-backed carriers and the moves globally to create solutions for systemic risks such as cyber and pandemics…