Pool Re backs new private-public consortium to tackle ‘systemic risks’

UK’s reinsurance mutual  Pool Re has agreed to provide funding for a new research consortium at the Cambridge Centre for Risk Studies (CCRS), the University of Cambridge Judge Business School, to develop protection against future systemic risks.

The research will support the creation and extension of private-public market institutions and develop new risk transfer products and advisory services. These may include extensions of coverage terms for traditional insurance lines of business, new types of insurance indemnification or risk sharing products, structured parametric bonds, corporate pools, bi-party swaps, and other financial instruments.

It will cover topics such as pandemics, cyber threats, geopolitical change, financial crisis, and climate change.

The research will enable exploratory design of new financial instruments and evaluate their benefit, both in terms of return on underwriting capital, but also in the potential consumer protection and societal benefits. Its results will better enable members to collaborate with public bodies – nationally and internationally - in risk reduction policymaking, thus improving global cooperation in reducing systemic risk.

“The COVID-19 pandemic triggered the deepest economic recession in our lifetime. Our policies, preparedness and financial responses require a significant overhaul if we are to better equip and protect society from the next major systemic risk that threatens our way of life, said Julian Enoizi (pictured), chief executive officer of Pool Re, and chairman of the industry consortium.

“The insurance industry is committed to coordinating and collaborating with the wider communities, and I am honoured to partner Pool Re Solutions with the Cambridge Centre for Risk Studies, who bring deep academic rigour to this new and expanding consortium.”

Michelle Tuveson, executive director and chairman of the advisory board at CCRS, said: “We are honoured to be leading this private sector consortium – their guidance in steering our research will be invaluable as we create new private market risk management products and services together.”

According to CCRS chief scientist Andrew Coburn, “Systemic resilience needs the foresight of systemic backstops to which capital markets can respond. Modelling to support new financial instruments will be critical in addressing future crises.”

Professor Daniel Ralph, academic director at CCRS, added: “GDP-sized government interventions have been the solution to pandemic-sized events, but government action at this scale is typically ad hoc – better regulatory and financial structures are needed to protect societies from long term erosion of wealth.”

Trevor Maynard, director of systemic risk research at CCRS, commented: “We look forward to applying our world-class research techniques to test and develop many of the initiatives being proposed. This will advance our research on the causes, linkages, and protection mechanisms for future systemic threats to society and the economy.”

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