UK's covert tool for ensuring terrorism protection
Pool Re, a unique public-private partnership, was established in 1993 in response to the significant terrorism risks posed by the extensive IRA bombing campaigns during the late 20th century. The UK government and insurers created Pool Re to ensure that terrorism risks remained insurable in the private market, thereby preserving economic stability and insurance availability [1].
The partnership comprises 100 members, primarily commercial insurers and Lloyd's syndicates, including AIG and AXA [1]. With an unlimited guarantee from HM Treasury, Pool Re acts as a reinsurer, providing cover for terrorism risk to insurers, thereby stabilizing the market by sharing risks with the government backing [1].
In the 1990s, the frequency and scale of IRA bombings exposed vulnerabilities in the insurance market, with insurers either unwilling or unable to offer affordable terrorism coverage. Pool Re's role was to backstop such risks with government guarantees, helping maintain confidence among insurers and businesses [1]. This arrangement effectively spread terrorism risk between the private sector and government, reducing the financial exposure of taxpayers while enabling insurers to offer terrorism coverage.
Pool Re has adapted to changing threat landscapes by updating its policies and reinsurance treaties, continuing to support the UK insurance market and broader economy by reducing uncertainties related to terrorism. Its presence reassures investors and businesses, contributing to economic resilience and infrastructure stability [1][2].
Since its establishment, Pool Re has paid out over £1.25bn in claims related to 17 terrorist events, with the last payment made for the Manchester Arena attack in May 2017 [1]. The entity collects premiums from its members on an annual basis and has a fund of £7.3bn [1].
Pool Re pays the UK government 50% of its annual premiums and 25% of any profit it makes [1]. The organisation invests a portion of its funds in the National Security Strategic Investment Fund, a venture capital fund primarily investing in startup companies in the UK's defense and security sector [1]. Additionally, Pool Re invests in national resilience initiatives alongside the government [1].
Pool Re's in-house team, Pool Re Solutions, helps companies understand and quantify terrorism and related risks [1]. The partnership has also expanded its cover to include non-damage business interruption and digital interference, and provides unlimited cover, including CBRN (chemical, biological, radiological, and nuclear) events [1].
Recent developments underscore ongoing government commitment to ensure terrorism risk remains manageable via such public-private mechanisms. Pool Re has committed over £200m to the National Security Strategic Investment Fund, and supports initiatives that enhance the police's counter-drone capability and help the Home Office with biometric data capture of illegal immigrants with potential terrorism convictions [1].
The Strategic Defence Review is expected to promote a shift toward "warfighting readiness" to deter potential aggressors and reinforce the UK's overall defense posture [1]. Clementi, CEO of Pool Re, argues that these developments underscore the importance of the private sector's role in helping bolster national resilience [1]. Pool Re's existence serves to distance the government and the taxpayer from the financial implications of terrorism.
[1] - Source: Pool Re's Annual Report and Accounts 2020 [2] - Source: Pool Re's website: https://www.poolre.co.uk/
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