Pool Re changes mark 'big step forward' for Airmic members

Airmic has welcomed the decision by Pool Re to implement far-reaching changes in the way the scheme operates. The association believes the reforms will make Pool Re more attractive to its members, whether they buy terrorism cover through Property insurers or their own Captives.

At an EGM on November 21, the reinsurer's members voted unanimously to support a more flexible approach to setting premiums and terms. The move has the support of HM Treasury, which underwrites the scheme as reinsurer of last resort. Members also accepted controversial proposals, demanded by the Treasury, to increase the amount they pay the government for backing Pool Re.

There was concern that the new charges would make it impractical for Pool Re to go ahead with modernising their rules. However, Charles Roxburgh, director general of financial services at the Treasury, has written to Pool Re CEO Julian Enoizi explicitly endorsing the changes requested by Airmic.

Whilst the details have still to be determined, Pool Re had already accepted the need to evolve to a system that better reflects the risks inherent in individual businesses. This will include recognition of good risk management, a willingness to accept higher deductibles and greater reflection of differences in exposure to terrorist threats. There will be streamlined access to Pool Re for small businesses.

"Pool Re's new approach is great news for Airmic and its members," said the association's chief executive John Hurrell. "It's a big step forward into the 21st century. It will make the scheme an even more valued protection against the threat of terrorism to UK businesses and also to many public-sector organisations. Pool Re's management are to be congratulated on making it happen despite the very difficult pressures they face in terms of increased payments to the UK Treasury."

Other changes agreed at the EGM dramatically increase the premiums that Pool Re pays for using the government as a reinsurer of last resort; these are set to rise from 10% to 50%. In addition, the Treasury is introducing a proposed dividend of 50% of any trading surplus to be divided between HMT (25%) and members (25%), including member captive owners.

Talks are now expected to take place between Pool Re and Airmic to discuss how best to introduce and implement new charging structures.