Enoizi makes case for expanding Pool Re to cover pandemic risk

CEO Julian Enoizi believes it makes sense for Pool Re to expand its remit and be the vehicle for any state-backed pandemic or wider systemic risk financing solution in the UK, but stressed the decision is ultimately for government and the insurance industry to make. There are currently several initiatives underway in the UK to find a risk transfer solution for future pandemics, after the role of insurance has been found wanting during Covid-19. Experts agree that covering non-damage business interruption (NDBI) from Covid-19 or any future pandemic is simply too big a risk for the insurance industry to take on alone. The solutions put forward therefore involve public-private partnerships, with the insurance industry taking on some of the risk and the UK government providing a backstop. This is how Pool Re was created 27 years ago to deal with terrorism risk and still operates today. One UK proposal is Pandemic Re under the chairmanship of Stephen Catlin, CEO of recently launched specialty insurer and reinsurer Convex. Pandemic Re’s insurance industry steering group already has a number of industry heavyweights on board, including Mr Enoizi. Another potential solution is Black Swan Re put forward by Lloyd’s. The proposed government and industry partnership would provide cover for all sorts of systemic NDBI risks, including pandemics. Airmic has welcomed both schemes. Experts are considering how such schemes could operate, including whether through an expanded Pool Re or setting up another pool on similar lines. Speaking during a panel debate on future catastrophic risk financing at Airmic’s virtual annual conference today, Mr Enoizi suggested Pool Re should be seriously considered to deliver any solution. “If in the future, the insurance industry, in tandem with government, chooses Pool Re to be the vehicle for a Black Swan Re or Pandemic Re, or whatever it happened to be, it would probably make sense because you have a group of professionals that do nothing other than manage systemic risk. But it is a decisions for others to take,” he said. He also said that Lloyd’s’ Black Swan Re concept, which is similar to a proposal put forward by Ferma and now under consideration by the EC, “makes absolute sense”. “I think as a country we should be looking at the risks holistically and managing those on the national risk register holistically. That would provide a spread of risk and better cover for businesses. Otherwise, we are going to be asking them to buy lots of individual policies for lots of individual perils. And they simply aren’t going to be able to do that,” said Mr Enoizi. He added that Pool Re’s current five-year review is a great opportunity for the state-backed terrorism reinsurer to provide a template for how a well-run and managed disaster risk financing mechanism can operate. Lloyd’s CEO John Neal was a fellow panellist on the Airmic Fest session, hosted by Commercial Risk Europe editorial director Adrian Ladbury. Mr Neal told delegates that Lloyd’s is in discussion with governments around the world to deliver macro cover for systemic NDBI risks. But he stressed that government focus is currently very much on the here and now, rather than longer term. “I have to say governments are focused on the very, very short term. It is quite difficult to get macro thinking beyond the next month, two months or three months,” added Mr Neal. Lloyd’s has also put forward two proposals that aim to protect organisations from further waves of Covid-19. Its Recover Re solution would require government and industry backing and could be set up in any country. As an after-the-event insurance, the model would offer NDBI for the longer term and include the current Covid-19 pandemic. ReStart, meanwhile, proposes to cover UK SMEs from NDBI for future Covid-19 outbreaks by pooling capacity from Lloyd’s players. Lloyd’s said the initiative would not need government support and would put in place a range of limits to make it affordable to buyers. And Mr Neal said today there is good progress on ReStart, which is likely to be available early next year. “It is being developed in the market; it is happening now with the intention to provide cover as quickly as we can – which will be early next year,” he said.

Enoizi makes case for expanding Pool Re to cover pandemic risk

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