Catlin chairs UK pandemic industry group, looks to Pool Re on reinsurance

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A steering group has been formed by UK insurance and reinsurance industry leaders with Stephen Catlin of Convex as Chair, to work with UK government backed mutual terrorism reinsurance firm Pool Re to strengthen the industry’s response to future pandemics.

coronavirus-covid19-pandemic-worldWith the significant impact of the Covid-19 coronavirus pandemic on the insurance and reinsurance sector still becoming clearer, the industry wants to get on the front foot in terms of being able to propose a response to the government and public for how it will handle a future pandemic.

Chief among the issues seems to be reinsurance arrangements and how risk sharing is undertaken, to ensure the industry has sufficient capacity and the ability to absorb the potentially massive losses that a pandemic can threaten.

Enter Pool Re, the UK’s mutual reinsurance entity for terrorism reinsurance that is seen as a shining example for how to share risk, pool and mutualise it, then retroceded what is necessary using traditional retrocession and also the capital markets.

The primary objective of the steering group is to ensure that the UK insurance and reinsurance industry can strengthen its response to future pandemics.

It will work alongside the industry to support customers and communities through the current crisis, but the longer-term focus of preparation for the next pandemic threat seems to be the key.

The first meeting of the steering group was held on April 17th, with Stephen Catlin (Chairman and CEO, Convex) acting as Chairman, the other members of the group include: Maurice Tulloch (CEO, Aviva), Stephen Hester (CEO, RSA), Julian Enoizi (CEO, Pool Re), Nick Frankland (UK CEO Reinsurance Solutions, Aon), James Nash (CEO, International, Guy Carpenter) and James Kent (CEO, Willis Re).

More participants from the industry are expected to be invited to join in due course.

Given the heavy reinsurance broker contingent, plus the inclusion of Pool Re, it seems pandemic reinsurance and risk sharing are set to be at or near the top of the agenda for the steering group and core among its recommendations to government.

Stephen Catlin of Convex commented, “The insurance industry needs to be on the front foot in the current situation, paying claims quickly and continuing to provide people and businesses with the protection they require. Most importantly we need to find an industry solution for future pandemics and this group has many years of combined industry experience.”

The main objective is said to be proposing an industry response to pandemics to both the government and the country.

Pool Re will work alongside the steering group to provide structural recommendations, which are likely to include how the industry gets to a stage where it has reinsurance capital to support and underpin the systemic level risk posed by pandemics and major outbreaks.

The group said that the insurance and reinsurance industry is “well placed to support the government, individuals and businesses through its sophisticated claims paying ability and distribution channels.”

In addition, the industry can offer much more through its links to and work with academia, on providing the necessary expertise to help drive forward risk mitigation efforts as well.

As our sister publication Reinsurance News explained yesterday, there are UK government level discussions underway already on providing a reinsurance backstop for trade credit exposures, due to fears capacity could become limited for this business line without a solution.

Other countries, including France, Germany and the Netherlands, have guaranteed trade credit insurers to a degree already and more are expected to follow-suit. This won’t stem the initial flow of losses that line of business faces, but may help to keep capacity flowing.

The United States has seen a similar focus on pandemic reinsurance provision, with a bill set to be debated to establish a U.S. Federal government backed reinsurance program for pandemic insurance claims through the passage of a of a Pandemic Risk Insurance Act (PRIA).

This new steering group seems more focused on a holistic response, using the model developed by Pool Re for risk sharing and reinsurance.

Reinsurance capital remains plentiful, although for pandemic coverage right now it is very expensive. Hence any industry solution will have to leverage techniques such as risk pooling, to ensure economies of scale, plus access the retrocession market to lay off the peak level exposures where it can.

The potential for a role for the insurance-linked securities (ILS) market in this is apparent, given the capital markets ability to absorb and diversify away significant and peak risk exposures.

The Pool Re model provides a robust starting point for any work on a future pandemic reinsurance facility for the UK insurance industry.

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