The HM Treasury (HMT) has released an updated set of general principles for interpreting the definition of an “act of terrorism” under the Reinsurance (Acts of Terrorism) Act 1993.
The guidance, addressed to Pool Re, outlines how HMT will approach certification of incidents for coverage under the Pool Re scheme.
The letter, sent by Gwyneth Nurse (pictured above), director general of financial services at HMT, notes that the updated principles follow discussions with Pool Re and supersede guidance issued in 2004.
HMT emphasized that the principles do not alter the coverage provided by Pool Re but are intended to clarify the existing framework. The Treasury stated, “They cannot be taken as a definitive legal interpretation and are not offered as legal advice to parties who might be affected by the scheme, nor as any legally binding undertaking by HMT to any person.”
The updated principles from HMT clarify that the definition of “acts of terrorism” centers on the relationship between the act and an “organization.” The guidance provides details on the scope of “organization,” the types of acts included, and the required connection between the act and the organization, among other interpretive points.
HMT’s letter was also copied to representatives at the Association of British Insurers (ABI) and the British Insurance Brokers’ Association (BIBA). The Treasury has encouraged insurance professionals to review the updated principles for clarification on the application of the Pool Re scheme.
Pool Re, Great Britain’s government-backed reinsurer for terrorism-related risks, recently implemented a modernized catastrophe treaty reinsurance scheme.
The new model is designed to address the evolving landscape of terrorism threats and provides members with greater flexibility in underwriting and pricing. The scheme aims to make terrorism coverage more accessible, particularly for smaller businesses and those that previously lacked protection.
Under the updated structure, Pool Re members can now tailor their retentions for various terrorism risks, including chemical, biological, radiological, nuclear (CBRN), and cyber physical damage, as well as more conventional risks. This flexibility allows members to better manage their exposure and align coverage with their specific risk profiles.
Pool Re manages more than £7.2 billion in assets and has recently overhauled its investment and risk management infrastructure. The organization adopted Clearwater Analytics’ platform for real-time modeling and scenario analysis, aiming to improve speed, accuracy, and insight in its investment decisions and risk management processes.
Earlier this year, Pool Re expanded its retrocession program, securing £2.75 billion in aggregate excess of loss cover placed with more than 60 reinsurers globally. The increase from the previous £2.4 billion limit reflects the organization’s ongoing efforts to reinforce the resilience of terrorism coverage for the UK market.
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