Pool Re moves into terrorism risk management

The dynamic nature of terrorism risk will see Pool Re work closer with UK companies and provide more risk management support, data and tools, according to its chief underwriting officer. In addition to the provision of property damage and business interruption terrorism cover in the UK, Pool Re will increasingly provide services to help companies manage terrorism risk, Steve Coates, chief underwriting officer at Pool Re, told Commercial Risk Europe. “Pool Re is moving into the provision of risk management services for terrorism risk. If, as a reinsurer, we focus only on terrorism, we should be the thought leader on the topic and share this with policyholders to their benefit,” he said. “Terrorism is not like natural perils – the risk is very dynamic and changes over time. Pool Re needs to help policyholders to access information to understand the risk, manage it, and mitigate it themselves,” added Mr Coates. “Pool Re raises awareness of terrorism risk, but it can also act as a conduit between the government and UK plc, and develop tools and technology to help policyholders evaluate and quantify terrorism risk,” he continued. For example, Pool Re is working with Airmic and Cranfield University to promote terrorism risk issues. It has piloted a scheme to train insurers’ risk surveyors in counterterrorism, a programme that will be rolled out this year. Most recently, the reinsurer announced a joint initiative with UK National Counter-Terrorism Police HQ and the Home Office’s Joint Security and Resilience Centre. It will develop an information-sharing platform for companies to access information and advice on terrorism risk. Pool Re has invested £10m in the platform, which will also offer online accredited training. This follows a number of initiatives in recent years promoting terrorism risk management best practice. Last year, Pool Re launched a terrorism vulnerability self-assessment tool, which offers a 5% discount for companies that meet the accredited standard. Pool Re also provides a 5% discount to companies completing the government’s Crowded Places programme. “We are only at the start of this journey and will continue to develop and improve the tools. We are developing sector-specific question sets and will be able to help individual clients and captives understand and quantify terrorism risk,” said Mr Coates. Large companies will be able to access Pool Re’s expertise for external validation, data, information and assistance with developing loss scenarios. Pool Re will also raise awareness of terrorism risk among small to medium-sized companies, which may need to develop business continuity plans. Under its updated underwriting manual, Pool Re introduced a wider range of discounts in 2018 for policyholders that retain risk, either through deductibles or loss limits. The move went some way to addressing calls by insurance buyers for greater flexibility and more risk-reflective pricing by Pool Re. “Under the current scheme we give a discount for lower loss limits, but clearly there is more we can do to make sure that pricing is as reflective of risk as it can be. As modelling and tools improve, it should be possible to make pricing more responsive and flexible,” said Mr Coates. Pool Re’s latest Terrorism Frequency Report says the number of attacks in Europe and the UK during this year and last, is down on 2017. There were only nine notable incidents in Europe during 2018 and two in the UK, with no deaths. This compares to 2017, when 36 people were killed and more than 300 injured by terrorists in the UK alone. However, the risk has not abated, according to UK terrorism backstop Pool Re. Extreme right-wing groups pose a growing threat while the risk of a spectacular attack from Islamist extremists cannot be discounted, its report says. Terrorism risk in Europe and the UK has changed dramatically in recent decades, moving beyond bombing campaigns and targeting property. The terror threat now comes from more sources. Far-right extremists, for example, are a rising threat, using a wider range of tactics, including gun and knife attacks, cyberterrorism and even drones. The changing nature of terrorism calls for a more “proactive” response from companies, with a greater focus on risk management and loss prevention, according to Pool Re. The past two years have seen Pool Re make some big changes to its offering, closing gaps in terrorism cover and increasing participation from the private sector. Last year, the reinsurer extended its cover to include cyberterrorism. In February 2019, it began offering non-damage business interruption. It recently completed a £2.3bn retrocession deal and launched the first-ever dedicated terrorism catastrophe bond. The £75m terror catastrophe bond was issued through a special-purpose vehicle, Baltic PCC Ltd. It was only the second cat bond to use the UK’s recently introduced framework for insurance-linked securities (ILS). Pool Re’s slew of changes has two main objectives, explained Mr Coates. “We want to make sure that the cover given by Pool Re deals with the current threat and the future manifestation as we understand it, whether it is cover for cyberterrorism or non-damage business interruption,” he said. “We also have to make sure that ultimately Pool Re only supplies cover where the market cannot. The recent ILS and retro reinsurance programme show Pool Re will harvest capacity available in the private market in order to reduce the exposure of the tax payer,” he added.

Pool Re moves into terrorism risk management

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