Pool Re completes £2.3bn retrocession placement

Pool Re has today announced the completion of its £2.3bn retrocession programme with more than 50 international reinsurers and led by Munich Re. The three-year programme is one of the largest reinsurance deals in the world, and the largest ever terrorism risk placement.

The retrocession is structured as an aggregate excess of loss treaty which will attach if Pool Re’s losses (individually or in aggregate) exceed £500m in any year after member insurers’ combined retention of £250m per event or £410m in aggregate.

The £2.3bn total reflects a further annual increase, up from £2.1bn in 2018, as Pool Re continues to return UK terrorism risk to commercial markets. The £2.3bn includes £75m provided under the state-backed insurer’s recent cat bond. The retrocession wraps around the bond to form a notional layer of £200m in excess of £500m.

Chief executive of Pool Re, Julian Enozi thanked Guy Carpenter for its efforts in completing this record-breaking placement, saying it provides resilience for UK businesses, while moving the taxpayer even further away from their implicit coverage of extreme commercial losses from terrorism. “We are delighted with the ongoing support we have received from our continuing reinsurers, and pleased to welcome new carriers to the risk,” he said.

The risk was modelled by Pool Re, using its own model developed with Cranfield University and Guy Carpenter. In another first, it fully deployed computational fluid dynamics to assess blast risk which considers how blasts move over, around and between buildings.

Steve Coates, Pool Re’s chief underwriting officer, commented: “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.”

Reflecting the underlying insurance provided by Pool Re through its member insurers, the retrocession covers property damage arising from nuclear, biological, chemical, and radiological attacks; those arising from cyber-triggered terrorist losses; as well as conventional terrorist acts.

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