Pool Re, the British government-backed terrorism reinsurer, has placed a £2.3 billion retrocession programme with more than 50 international reinsurers, the largest terrorism risk placement ever.
The programme was led by Munich Re and is provided on a three-year basis.
The retrocession is structured as an aggregate excess of loss treaty that will attach should Pool Re’s losses, individually or in aggregate, exceed £500 million in any year, after members insurers’ combined retention of £250 million per event or £410 million in aggregate.
The total of £2.3 billion reflects an annual increase, up from £2.1 billion last year, as Pool Re continues to return UK terrorism risk to commercial markets.
The placement includes Pool Re’s recent £75 million terrorism catastrophe bond, and the retrocession wraps the bond to form a notional layer of £200 million in excess of £500 million.
It covers property damage arising from nuclear, biological, chemical, and radiological attacks; those arising from cyber-triggered terrorist losses; as well as conventional terrorist acts—reflecting the underlying insurance provided by Pool Re through its member insurers.
The risk was modelled using Pool Re’s own model, developed with Cranfield University and Guy Carpenter, which for the first time fully deployed computational fluid dynamics to assess blast risk which considers how blasts move over, around and between buildings.
Julian Enoizi, Pool Re CEO, commented: “We are delighted with the ongoing support we have received from our continuing reinsurers and pleased to welcome new carriers to the risk.”
He added that the record-breaking placement “provides resilience for UK businesses while moving the taxpayer even further away from their implicit coverage of extreme commercial losses from terrorism”.
Steve Coates, Pool Re’s chief underwriting officer, added: “As our modelling technology has improved, we have been able to increase appetite for a share of Pool Re’s assumed risk.”
“We will continue to look for increased retrocession and capital markets capacity to shift even more of that risk to the private sector, provided of course the capacity is of acceptable security and can be written on a long-term basis.”
