Munich Re leads Pool Re's £2.3bn terrorism retrocession placement

UK government-backed terrorism mutual reinsurer Pool Re has completed a £2.3 billion terrorism retrocession placement led by Munich Re.

The placement involved more than 50 global reinsurers. It is said to be the "one of the largest reinsurance deals in the world, and the largest terrorism risk placement ever".

The retrocession covers property damage arising from nuclear, biological, chemical, and radiological attacks; from cyber-triggered terrorist losses, as well as conventional terrorist acts.

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

The £2.3 billion total reflects a further annual increase, up from £2.1 billion in 2018, as Pool Re continues to return UK terrorism risk to commercial markets. All of the capacity is written on a three-year contractual basis.

Pool Re said the £2.3 billion includes £75 million provided under its recent terrorism catastrophe bond. The retrocession wraps around the bond to form a notional layer of £200 million in excess of £500 million.

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

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

The risk was modelled using Pool Re’s model, developed in collaboration with Cranfield University and Guy Carpenter.

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