The ABI (Association of British Insurers) today confirmed that it has opened discussions with the Treasury on the future provision of commercial property re-insurance against acts of terrorism. This review is designed to respond to changed perceptions and understandings of the extent and likelihood of risks from terrorist acts since September 11th. It will also take into account the development of the insurance market since the Pool Re re-insurance mechanism was established following discussions between the Government and the industry in 1993. The Government will be reviewing with the ABI the operations and scope of Pool Re. The aim is to agree a mutually acceptable way forward by 1st March 2002 that will enable commercial property and business interruption insurance to be provided to customers in the UK against a wider range of losses from terrorist acts. The aim is to reach an agreement that will apply to liabilities arising on or after 1st January 2002. Amongst other issues, the review will consider:

• Extending Pool Re to cover additional perils for commercial property damage, within existing legislative boundaries;
• The way Pool Re is financed in order to encourage competition and protect customers’ interests. Issues to be addressed will include premium rates, thresholds for industry participation, and ways of accessing commercially available terrorist insurance capacity;
• The governance of Pool Re.

Both parties have agreed that solutions must be practical, commercially viable and consistent with the consumer and taxpayer interest. Mary Francis, Director General of the ABI, said:

“The tragic events of September 11th have forced everyone to re-examine the risks we face from modern-day terrorism. The insurance industry is working hard to ensure that as much cover can be provided as possible against exposures that can be enormous. Pool Re is an outstanding example of how Government can work with the private sector to the advantage of the whole community. We should now build upon its achievements.”

Notes

1. Following numerous terrorist incidents in the UK, Pool Re was established by statute in 1993 as a mutual re-insurance company to provide cover above a threshold for property damage and business interruption from fire or explosion caused by terrorist actions. It is owned by all of the most significant participants in the UK commercial property insurance market. The Treasury stands behind Pool Re as the re-insurer of last resort, though no call has been made on the Government during the lifetime of Pool Re.
   
   
2. The agreed terms of reference for this review are available from the ABI press office and also on the Treasury website.
   
   
3. The ABI is the trade association for Britain’s insurance industry. Its more than 400 member companies provide over 97% of the insurance business in the UK. We represent insurance companies to the Government, and to the regulatory and other agencies, and provide a wide range of services to our members. ABI member companies account for more than a fifth of investments in the London stock market.
   
   
4. Enquiries to: Malcolm Tarling - 020 7216 7410 - (Mobile: 07776 147 667)
   
   Alan Leaman - 020 7216 7440 - (Mobile: 07957 482330)
   
   
5. An ISDN line is available for broadcasts.