Pool Re announced a slew of modernisation reforms today, including: increased deductibles; risk reflective pricing; and a revised proposition for small-and-medium-sized enterprises (SMEs).
The UK terrorism reinsurance fund will allow discounts for deductibles between £500,000 and £1m.
For loss limits in excess of £500m, Pool Re said it will consider discounts on locations where insured values are at least 20% more than the limit.
Pool Re has also developed a “bespoke SME proposition” which will offer a 40% discount for insureds with less than £2m material damage sum insured.
Julian Enoizi, Pool Re’s chief executive, recently spoke to Reactions, giving the lowdown on the upcoming modernisation changes, in an interview featured in the current (May) issue of the magazine.
“We are also able to create a proposition priced specifically for the SME sector, which is aimed at spreading coverage for the risk more broadly across the country by increasing take up. What we are trying to do is address a potential imbalance within the makeup of the Pool Re premium base,” said Enoizi.
“If you think about a situation where a bomb went off without many SMEs having purchased cover, then that is an economic loss and one which gives rise to other interesting questions such as whether the government step in in that situation,” he continued.
The “risk reflective pricing” reform is the first major update since the last overhaul in July 2002, when Pool Re's cover was broadened to respond to the post 9/11 terrorism environment, after which the commercial re/insurance market was unwilling to dovetail its cover with the Pool Re scheme.
Pool Re's cover was therefore extended to an “all-risks” basis, and no longer restricted to fire or explosion. Exclusions relating to chemical, biological, radiological or nuclear attack were at that point removed.
At present, Pool Re’s members write terrorism risk at a rate across four defined zones set by the reinsurance pool, and cede their premium into the fund. Insurance consequently varies massively between zones A (central London) and D (outlying regions).
“We're trying to use modern modelling techniques to get a good idea about the cost of an event in a certain location, and then utilise that to arrive at a more risk reflective rate,” said Enoizi.
The changes will take effect later this year, with Enoizi attending industry events such as the British Insurance Brokers' Association (BIBA), currently taking place, to market the changes. Reviews have been broadly positive, he suggested.
”The implementation of several key modernisation initiatives on 01 October 2015 represents a significant milestone in the history of Pool Re. The scheme must evolve in tandem with the shifting threat facing businesses across the UK,” he added.
For the full Enoizi interview, please click here.