Pool Re gets green light to cover cyber
The UK government has given Pool Re
permission to extend its coverage to
include cyber perils—a move that has been
warmly welcomed by the company.
Julian Enoizi, chief executive, Pool Re, told
Monte Carlo Today that he had felt for some time
that covering the physical implications of a
cyber attack was the right thing to do and that
the green light from the government was the
culmination of several years of hard work in
Enoizi explained that when Pool Re’s
coverage was extended in 2002 from covering
‘named perils’ to ‘all risks’ including chemical,
biological, radiological or nuclear (CBRN), a
cyber exclusion was added. He said that such
exclusions were then common in policies in the
aftermath of the so-called Millennium bug, also
known as Y2K.
“Over time the terrorism threat has evolved.
A couple of years ago we identified the fact that
physical damage could theoretically be caused
using remote digital means. We felt it would be
wrong, after a loss of that nature, to exclude it.
Physical damage is physical damage, no matter
how it’s caused.
“If it’s terrorism and it has a physical impact
then we should be covering it,” Enoizi said.
“We explained that point to the UK
government and they agreed. We then
collaborated with academics to understand
what was possible, who was likely to be doing
it, and what the causes and amounts of damage
Pool Re worked with the University of
Cambridge Judge Business School, which
specialises in this area, and started a project to
explore the topic in more detail.
“They produced a report that we shared
with our stakeholders and, on the basis of
that report, we decided we could extend
the coverage. We couldn’t insure contingent
business interruption, which would be too
broad, but the physical damage arising out of a
cyber trigger could be something that we could
and should insure,” said Enoizi.
He stressed that this kind of coverage
has to be continuously adapted to cope with
developing changes in the nature of terrorism.
Pool Re will now work with the UK
government on the finer details, with a view to
issuing underwriting guidelines at the end of
September. The market then has six months
to implement the new guidelines on cyber into
their policies. n
Reinsurers and ILS to benefit from post-Irma demand
Traditional reinsurers and insurance-linked
securities (ILS) funds are likely to benefit
from reinsurance demand post-Hurricane
Irma, Willis Re executives suggested at the
Monte Carlo Rendez-Vous.
“There will be two winners in the market:
the traditional reinsurers, that can align
themselves with new capital quickly, and the
same with the ILS funds,” said Willis Re deputy
CEO James Kent.
Hurricane Irma, which hit Florida on
Sunday, September 10, is likely to accelerate
ILS growth. ILS is a major source of capacity
in the Florida reinsurance market.
“With the storms looming, it is likely that
ILS will grow further and even faster,” said
Willis Towers Watson Securities CEO Rafal
Non-life ILS issuance reached a recordbreaking
total in the second quarter of 2017,
continuing the trend from the first quarter of
A Willis Towers Watson Securities report
found that after a better-than-average issuance
volume in the first quarter, in Q2 2017 $6.3
billion of non-life catastrophe bond capacity
was issued through 36 tranches, compared with
$1 billion issued through 17 tranches in Q2
2016 and the previous quarterly record of $4.5
billion issued in Q2 2014.
Willis Re expects the reinsurance market,
including cat bonds, to react in a disciplined
way to Hurricane Irma.
The majority of cat business that is
purchased today is placed with A+ reinsurers
or collateral, Kent noted.
“Post-event we know that the ILS market
has a fluidity to move. A number of funds have
contacted brokers and clients to say they are
ready to move with capital behind. Reinsurance
capital is a fraction of capital available in pension
funds and private funds that exist today.”
Walkiewicz added: “Irma is unlikely to
scare investors off from the ILS space—on
the contrary. We hear from investors: ‘we have
capital, and when there is any movement in
price, we are willing to invest’.”
From cedants’ perspective, cat ILS is mostly
done in collateralised form, he noted. “You
don’t have credit risk, it should be settled fairly
quickly and easily. If I can make a judgement,
it’s that big storms can only accelerate growth
in ILS.” n
18 | MONTE CARLO TODAY | DAY 3: Tuesday September 12 2017 www.intelligentinsurer.com | www.bermudareinsurancemagazine.com