The panel had a wide ranging discussion on terrorism, the insurance industry and systemic risks. Discussion included the lessons we can learn from Covid-19 about the UK’s resilience and preparedness, and implications for the insurance industry and how other systemic risks such as climate change are managed. There was also discussion of the future strategic direction and challenges for Pool Re and the insurance industry.
Alex focused his contributions on how Covid-19 has exposed radically different approaches to government fulfilling its role as insurer of last resort:
- As Covid-19 began to unfold there was no support already in place to help businesses and individuals to cope with the economic fallout, nor any ready mechanism to distribute it.
- By contrast, government also acts as insurer of last resort for terrorism through the Pool Re scheme. Terrorism insurance provides clarity on what support is available in the event of an attack and has an established distribution mechanism through the insurance industry.
The Government has choices about how it fulfils its role as insurer of last resort, and Covid-19 has shown that a lack of preparedness places enormous pressure on Government, taking a great deal of time and attention, and introduces a great deal of costly uncertainty for individuals and businesses.
Alex notes that:
“There is a clear imperative from the current crisis to find a better way to manage pandemic and other systemic risks. One obvious pathway rightly being explored at the moment by industry is the use of mechanisms like Pool Re that offer a means of sharing risk and putting in place a foundation of support for businesses and individuals.”
Pool Re was established in 1993 to enable the UK insurance industry to underwrite terrorism insurance for commercial property in the UK, supported by a government guarantee. Pool Re hosts an annual event to share information with the insurance industry. This year’s event also saw John Glen, Economic Secretary to the Treasury, deliver a keynote speech as well as the launch of Solutions , a new publication setting out significant developments in the field of terrorism risk.
Frontier regularly advises on issues in the financial services sector and on public policy issues.
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