Pool Re explores terror ILS options with help of GC Securities

by Artemis on April 25, 2018

UK government-backed mutual terrorism reinsurance facility Pool Re announced today that it has enlisted the help of GC Securities as it explores the issuance of an insurance-linked securities (ILS), to identify the options available to it in tapping the capital markets for terrorism retrocession.

GC Securities, the ILS and capital markets specialist arm of reinsurance broker Guy Carpenter, successfully won a competitive RFP process and has now been named as Pool Re’s insurance linked securities (ILS) advisor and placement agent.

Julian Enoizi, chief executive, Pool Re, commented on the news, “One of Pool Re’s core aims is to normalise the UK’s terrorism (re)insurance market and allow as much of the risk as possible to be underwritten in the commercial markets. Extending our protection by accessing the ILS market is something which we have been looking at for some time.

“With recent legislative change in the UK, the environment is now conducive to exploring this further. We have significantly improved our own understanding of the risk, developing more robust modelling capabilities and gaining significant experience from the success of our reinsurance programmes. Now is the right time to explore the appetite of broader capital for this increasingly well understood peril.”

James Nash, President, International, Guy Carpenter, also said, “We are delighted and honoured to be awarded this prestigious appointment. Guy Carpenter has worked closely with Pool Re to assist with the development of its innovative risk model and the placement of its traditional reinsurance programme.

“This new engagement provides an exciting opportunity to explore the benefits of structuring and placing terrorism risk with the ILS market. It is also an opportunity to showcase the UK ILS industry and enhance Pool Re’s position as a pioneer in the global terrorism reinsurance market.”

Pool Re has been actively assessing the appetite of the capital markets to assume some of its excess terrorism reinsurance risk for a while now, as the terror risk pool looks to diversify its sources of retrocession capacity and expand its coverage sources to include ILS funds and investors.

The ILS market is not unfamiliar with terrorism risk. There have been a number of ILS players that have underwritten terrorism risk on a collateralized basis over the years and it continues to be a component of a number of the more specialty focused ILS funds portfolios.

Additionally, specific private transactions have seen novel terror risk securitisations, again on a private and largely bilateral basis. But any terror ILS offering from Pool Re would likely be the largest such placement of terror risk into the capital markets.

Pool Re said that in appointing GC Securities, the partnership will help it to “further assess its options from the ILS market.”

This will include assessing the structures available, whether a placement is viable and the appetite of ILS funds and investors to assume terrorism risks.

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