Pool Re to reward good risk management

Published on Mon, 01/12/2014 - 00:00

Julian Enoizi, chief executive of Pool Re, has said that the decision to implement far-reaching improvements to the terrorism reinsurer will result in it being “more of a surgical knife rather than a blunt instrument.” At an EGM on November 21, the reinsurer's members voted unanimously to support a more flexible approach to setting premiums and terms.

Speaking to Airmic News about the planned modernisation – the details of which have yet to be fleshed out – he said that companies that can demonstrate tangible risk mitigating measures should be rewarded.   “If the customer wants to introduce some kind of risk control measure – as long as they are genuine and are really going to make a difference - then perhaps we should look at reflecting some kind of credit in the premium.”  

Enoizi also said he would like to introduce a more risk-reflective pricing system, by having four different price bands rather than just two, and ironing out postcode anomalies. These are a source of frustration for Airmic members who can find themselves paying significantly more for terrorism cover than a similar organisation across the street, simply because they fall into a different postcode.

Pool Re will also look at the possibility of allowing deductibles in certain circumstances, although Enoizi stressed there may not be much room for manoeuvre. “I’ve always been very open about this – I can’t guarantee deductibles because of how the scheme operates overall, but we should look again at whether we can give some kind of credit if a company wants to take a deductible.”

Airmic has been calling for reforms for some years and has welcomed the outcome of the vote, saying the changes will make Pool Re more attractive to its members, whether they buy terrorism cover through property insurers or their own captives.

Sue Allaway, chair of Airmic’s property special interest group, said the changes couldn’t come soon enough. “The world has changed so much since Pool Re was launched in response to the IRA bombings in the 1990s. Lone suicide bombers are a completely different kettle of fish to IRA car bombs,” she commented.

“We do think a radical overhaul is required and so we welcome these changes. We now hope that this doesn't lose impetus.”

Pool Re members also accepted controversial proposals, demanded by the Treasury, to increase the amount they pay the government for backing Pool Re from 10% of premiums 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.

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 Enoizi explicitly endorsing the changes requested by Airmic. In addition, Pool Re has made a commitment that prices will not go up in the foreseeable future.

Alan Fleming, chair of Airmic’s captive special interest group and a former chair and chief executive of Airmic believes that common sense has prevailed. Fleming was instrumental in the creation of Pool Re in 1992 and says it remains essential to businesses today. “The reforms are very useful, especially the fact that they will be recognising good risk management. But the main thing is that the government is still supporting the scheme and that they found a pragmatic solution.”

Airmic has been in regular discussions with Pool Re to ensure that the needs of the insurance buyer do not get overlooked. Enoizi agreed that finding a solution that benefits all parties was important. “I made it clear to the Treasury that it’s not just about the one stakeholder, i.e. the taxpayer, it’s about all of the stakeholders, one of which being Airmic which represents the larger customer, and also brokers and SME clients across Great Britain.”

John Hurrell, the association’s chief executive said Pool Re's new approach is great news for Airmic and its members. "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."

Talks are now expected to take place between Pool Re and Airmic to discuss how best to introduce and implement new charging structures. The changes will then have to be agreed by the government and the Pool Re board, with a target date for finalising the reform by the middle of next year.

Julian Enoizi, Pool Re CEO.

Photo by Louise May Photography