Change of status for terror insurer Pool Re triggers anger

The future of Pool Re, the UK’s specialist terrorism insurer, has been thrown into doubt after the government’s Office for National Statistics changed its official status.

 Pool Re, which was set up by the industry in 1993, provides back-up cover for insurance companies in case they have to pay out after large-scale terrorist attacks. It is owned by the insurance industry, but in extreme cases it can also call on funding from the government. It pays the state some £200m per year for that ability.

 On Friday the Office for National Statistics announced that Pool Re should be classified as a government entity, which means the company’s £6.7bn of assets and liabilities will sit on the government’s balance sheet.

The ONS acted on a 2017 query over Pool Re’s status from the Office for Budget Responsibility, the official independent watchdog. Although the sum will not make a significant impact on the national accounts, it will trigger a debate about how the company works in the future. The organisation said that it had been granted a “derogation” by the Treasury so that it could continue to operate as normal until March 2021. After that, changes could be made.

 Julian Enoizi, Pool Re chief executive, said the ONS classification “presents an opportunity to stimulate further innovative thinking about the scheme’s future and we will use the derogation period to consider all possibilities”. Pool Re is backed by billions of pounds of insurer assets and, as owners of those assets, we want to be sure that the business continues to be managed by industry experts James Dalton, Association of British Insurers The insurance industry reacted angrily to the ONS move. “This is a challenging decision from the ONS with potentially serious implications for the future of the UK’s terrorism insurance market,” said James Dalton, director of general insurance policy at the Association of British Insurers, an industry body. He added: “Pool Re is backed by billions of pounds of insurer assets and, as owners of those assets, we want to be sure that the business continues to be managed by industry experts, not central government.”

 Pool Re was set up to tackle the risks posed by large terror incidents such as bomb attacks on buildings. Since it was set up, it has paid out more than £600m in claims.

 LONDON, ENGLAND - JUNE 03: Counter-terrorism special forces assemble near the scene of a suspected terrorist attack near London Bridge on June 4, 2017 in London, England. Police responded to what they are calling terrorist attacks on London Bridge and Borough Market where at least 20 people were injured and one person was killed.

 Pool Re has paid out just £19m in claims over the past decade. In response to the changes, Mr Enoizi has been working to modernise the organisation and in recent years has expanded Pool Re so that it can cover cyber attacks, chemical and biological incidents, and attacks that do not cause property damage. Recommended UK insurance industry Terrorism insurance costs cut for small UK businesses “As the nature of the terrorist threat has continuously evolved, Pool Re has been able to respond to support the insurance market,” he said. “These innovations would not have been possible without the high degree of operational independence currently afforded to Pool Re.” A Treasury spokesperson said: “Over the coming year we will consult on any changes and work with Pool Re and the insurance industry on the most effective way forward.”


Source: https://www.ft.com/content/1d66e8f2-5a3c-11ea-abe5-8e03987b7b20