COVID-19 is just one of a “daunting spectrum” of risks which need to be shared in new ways, according to Pool Re CEO Julian Enoizi.
Enoizi (pic) was speaking as part of the body’s livestream event, Guaranteeing Great Britain: Managing Terrorism Risk & Building Resilience.
“COVID has reminded us that systemic risks need to be shared,” he said. “Finding more successful ways to share the burden of systemic risks is going to be one of the defining features from an industry perspective for the next decade. COVID has confirmed that governments are the insurer of last resort, and that genie will not be put back in the bottle.”
Enoizi added that a successful public/private partnership “will enable a broader view of systemic catastrophe risk.”
Also speaking at the event was John Glen, the Economic Secretary to the Treasury, who referenced the recently established governmental review of the Pool Re scheme which is expected to conclude next spring.
Glen said the review is assessing whether the current balance between public and private risk sharing in the review is right, adding that “we have a duty to the taxpayer to ensure that the existing method of funding is appropriate”.
He added that the review will also examine ways in which SMEs can be encouraged to take up terrorism insurance.
Another of the panellists, Lord Brown, a former Secretary of State for Defence, addressed the issue of whether the UK was properly prepared for the COVID pandemic, suggesting that in recent years government risk planners were more concerned with the risks around a potential no-deal Brexit:
Lord Brown also criticised the “small number of people” within government looking at these sorts of major risks:
“We need a much broader discussion about what resilience means.”
Picking up the SME terrorism theme, Alex Kirykowicz, manager at Frontier Economics, noted that most SMEs in the UK still not purchase terrorism insurance and suggested that the treaty reinsurance market could possibly step in here to support an SME product.
Kirykowicz also picked up the theme of the balance of risk between the public and private sector for terrorism insurance, noting that in recent years the private sector has sought to play an increasingly significant role, whether that be through increased retentions or by the growth of the Insurance Linked Securities market.
“How much further can this go?” he asked. “What capabilities does the private sector need to manage and price the risk?… how do you continue to build these capabilities?”
Pool Re in brief
Pool Re is the insurance industry’s mutual for insuring terrorism risk in Great Britain, established in 1993 by the UK Government which provides unlimited backing to the scheme through a loan facility, the Retrocession Agreement.
Pool Re was officially classified as a government entity in March by the Office for National Statistics. This autumn HM Treasury launched a call for evidence on it operation as part of plans to establish its strategic direction for the next five years. Launching the review the government said:
“This call for evidence covers how the guarantee HM Treasury extends to Pool Re impacts the market for terrorism (re)insurance and how any amendments to the terms of the guarantee and the rules that govern HM Treasury’s relationship with Pool Re would impact the availability, affordability and take-up of terrorism insurance.”