Message from the Chief Executive - Pool Reinsurance .Message from the Chief Executive 2015 was an

Message from the Chief Executive - Pool Reinsurance .Message from the Chief Executive 2015 was an
Message from the Chief Executive - Pool Reinsurance .Message from the Chief Executive 2015 was an
Message from the Chief Executive - Pool Reinsurance .Message from the Chief Executive 2015 was an
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Transcript of Message from the Chief Executive - Pool Reinsurance .Message from the Chief Executive 2015 was an

  • Pool ReinsuranceNewsletter

    Spring 2016

    Message from the Chief Executive2015 was an incredibly busy year for Pool Re, and it is one thatended on a challenging and defining note following the tragicevents that occurred in Paris. 2016 has begun in the same way.

    Globally there are fourteen major terrorismreinsurance pools. Like Pool Re, theseprovide an essential backstop to protecttheir nations from the secondary effectsof terrorism and enable their economiesto get back on their feet.

    At the invitation of Pool Re, these poolsgathered together in London for the Inaugural National Terrorism ReinsurancePools Congress in October. Little did weknow then just how tragically prescientthe gathering would be, particularly forour colleagues at GAREAT, the Frenchterrorism insurance pool and TRIP, theBelgian pool.

    The Congress was an opportunity to formulate a pathway by which the insurance industry can once againevolve to better mitigate this seeminglyever changing threat. It was about thinking big, discussing global planningfor the management of terrorist threats,the idea of increasing the discount for buyers who undertake risk mitigationmeasures to increase penetration, and the emergence of cyber terrorism.

    Clearly the tactics of terrorism are evolving. New lone wolf attacks, suchas the gun attack on the Tunisian beach,or the attacks in Paris that spread acrossmultiple locations and included a varietyof crowded places, are difficult to predict, prevent or prepare for. Future attempted attacks will likely be differentagain, rather than simply mirroring thosebefore them.

    Pool Re facilitates the provision of terrorism insurance in the UK. It also hasan implied obligation to promote resilient

    cities. In this regard, particularly giventhe evolving threat of attacks on smallbusinesses, Pool Re has set about increasing the take-up of terrorism insurance by small businesses owners.To do so, it has introduced premium discounts of up to 40%.

    Moreover, in June, in collaboration with the Office of Security and CounterTerrorism, we introduced a 2.5% discountfor businesses completing the CrowdedPlaces Risk Management Programmerun by the National Counter TerrorismSecurity Office.

    The hard work is certainly not over andthe evolving nature of terrorism meansthat our work is ever more important. In November, the Chancellor announcedthat cyber now ranked alongside guns,bombs and knives as a terrorist weaponthat the UK needs to urgently defend itself against.

    Pool Re currently exclude cyber-terrorismbut given the apparent blurring of the line between property and cyber, wehave engaged the Centre for risk Studiesat Cambridge Business School to buildour understanding of the cyber threat.

    This will enable us to evaluate whetherthere are aspects of cyber-terrorism wemight cover in the future.

    The hard work is certainly not over and the evolving nature of terrorism meansthat our work is ever moreimportant.

    Julian EnoiziChief Executive

    2 Five facts about Pool Re2 The evolving threat landscape3 Current scheme resilience4 Pool Re what you need to know

  • Did you know?

    The evolving threat landscape

    1 Total insured value in Pool Reinsurance Scheme is 2.1 trillion

    2 More than 250 billion of this is in the highly concentrated area of the City of London, CanaryWharf and the West End

    3 We never refuse an eligible risk

    4 We reinsure most of the UKs major airports and railway stations,power stations and sites of criticalnational infrastructure

    5 Nearly all of the major infrastructureprojects currently underway in the UK are protected by PoolReinsurance

    The atrocities committed by Daesh haveprovided frequent tragic evidence of theevolution of the terrorist threat which weface. However, terrorism is not new a phenomenon to our shores. We have facedconsiderable challenges in the past whichour government, security services, insurersand industry have worked hard to tackle.What makes this threat any different? Why must we adopt a new approach tothat which has served us well in the past?

    The actions of the Irish Republican army(IRA) prompted the establishment of PoolRe and, to a degree, its structure and the cover the scheme provides reflects that organisations method of attack. The principal focus of the IRA, at least on the UK mainland, was to cause massive,largely commercial, property damage.Daesh is committed to causing death and mass casualties. To them propertydamage supports, through the longer termeconomic damage it causes to a countryseconomy, but is not central to their aims.

    IRA bombs were often accompanied by warnings to allow time for evacuation;Daesh seeks out crowded places to attackin an effort to wreak maximum civilian casualties. The IRA largely employed fertiliser bombs as their principal means of inflicting damage. Daeshs arsenal is significantly more varied, including lonewolf attacks employing knives or automaticweapons, suicide bombers, groups of gunmen, chemical and potentially radiological IEDs, macro explosive devicesand the exploration of cyber as a means of disruption. Indeed, the limitations of itscapabilities are as yet unclear. The IRAaims were solely focused on the UK. Daesh has set itself a global agenda.

    The threat we now face is more advanced,employs a greater variety of attack methodsand has an even more sinister ideology andoutlook. Our response must evolve andonce again reflect the nature of the threat.

    Pool Re provides reinsurance cover for catastrophic terror attacks. However theshifting nature of the threat landscape hasmeant that we too have sought to adaptour proposition. The possibility that Daeshor Al Qaeda could employ a hitherto unseen attack method, such as a cyber or chemical attack, which causes significantproperty and business interruption damagemust become part of our consideration.

    Todays terrorists appetite for causingmass civilian casualties has also promptedan evolution of our scheme. Last year welaunched an initiative, in partnership withthe National Counter Terrorism Security Office which has the potential to drive a significant increase in the implementationof counter terrorism security measures inpublic and private buildings across the UK.

    The genesis and development of the LossMitigation Credit initiative has, at its core,the goal of bolstering the UKs defencesagainst an evolving terrorist threat. Its launchnot only provides a clear incentive for organisations across Great Britain to implement the risk management techniquesand develop the infrastructure that canhelp thwart terrorist attacks but also, in the event of an attack, protect lives andmaintain commerce.

    That the threat presented by Daesh is not unique to our shores provided furtherimpetus for international collaboration. We are now working with our colleagues in terrorism reinsurance pools across theglobe to ensure that the extensive expertiseand experience housed within our own andother pools is shared and developed upon.

    In summary, 2015 saw the expansion ofDaeshs strategy to attack Western interestsand lifestyle targets well beyond Syria andIraq. Between March and December therewere eight major Daesh-related transnationalattacks, resulting in 620 fatalities. Our ownsecurity services have stated that sevenmajor radical extremist attacks were foiledon the UK mainland within the last year.

    Of concern, has been the intelligence reports that Daesh is seeking to use bothchemical agents and radiological materialwithin Improvised Explosive Devices (IEDs)against Western targets. The employmentof chemical IEDs has become ever-morefrequent in the ongoing conflict in Syria andIraq, and the global rise of groups affiliatedto Daesh has also resulted in the proliferationof such tactics, demonstrated by the recent use of a chemical IED in Indonesia.Additionally, despite being written off by many commentators, the recent attackson the Grand Bassam beach resort in the Ivory Coast, and Western hotels in the capitals of Burkina Faso and Mali,demonstrates that Al Qaeda remains a significant threat actor, with ambitionsand capabilities stretching well beyond the remote regions of the Trans Sahel intothe wider African continent and beyond.

    Looking forward, the first four months of 2016 have been equally violent: Daeshhave prosecuted a campaign againstWestern critical national infrastructure targets with significant economic consequences, as well as causing masscasualties. The impact on the Belgian GDP, post the attacks on Zaventem airportand Maelbeek Metro station, is yet to bedetermined. With increasing pressure beingapplied on Daesh strongholds in Iraq andSyria, the geographical spread of thegroups support base and lack of effectiveborder controls on the EUs Eastern andSouthern frontiers, we assess that there will more rather than less attacks againstEurope and her strategic partners.

    Five facts about Pool Re

    Todays terrorists appetite for causing mass civilian casualties has also promptedan evolution of our scheme.

  • Current scheme resilience

    We recently renewed the external reinsurance programme we placed in2015. The placement achieves three key objectives:> Protects scheme assets in the event of a terrorist incident.

    > Pushes the taxpayers further away from losses.

    > For the first time since 1993, re-engagesmeaningful global reinsurance capacity in aggregated GB terrorism.

    External capacity is now a key element of the scheme structure and the main features of the cover are:> We buy 1.95 billion excess of 500 million (increased from 1.8 billion in 2015), in two layers. The 500 millionattachment reflects dual need to provideliquidity for elements of most likelyevents, whilst remaining above the attritional level reinsurers would wish to avoid.

    > 50% of the programme is placed wi