The Pool Re cover will be extended to an “all-risks basis,” which will cover con-tamination, impact by aircraft or flood damage for U.K.-based property expo-sures, according to an announcement is-sued by the U.K. Treasury. The Treasury is the reinsurer of last resort for Pool Re, protecting it in the event that Pool Re exhausts all its financial resources fol-lowing claims payments.

The changes in coverage will be ac-companied by a doubling in premium and an option to backdate the coverage to any day following Jan. 1, 2002.

Pool Re was set up in 1993 to ensure that terrorism insurance would be avail-able when insurers withdrew en masse from providing terrorism insurance for commercial property. It currently has reserves of 1.2 billion ($1.9 billion).

Despite the expanded coverage into the areas of nuclear and biological expo-sures, Pool Re members “believe that their exposure under the new proposed basis will be more limited than it was previously,” said Steven Atkins, chief ex-ecutive of Pool Re in London in an inter-view.

“One of the key features of the altered arrangement is that the members expo-sure will in future be specifically capped, both per event and there also will be an annual aggregate cap,” said Mr. Atkins.

Previously, members had a retention level that was, broadly speaking, 100,000 per section of the policy (roughly $157,000), but there was no limitation on how many of those 100,000 retentions they might sustain in a particular incident or over the period of a year, he said.

As a result of the changes, he said, the maximum industry retention will be set at 30 million per event in 2003, with in-dividual insurers retentions based on their share of the market, Mr. Atkins ex-plained. The retentions will then rise over a four-year period, he said.

“The market share will define the per-event exposure of each insurer in each year,” he said.

“[I]t is intended that the retention will increase steadily, bringing commercial reinsurance in to cover insurers reten-tions or permitting insurers to retain this element of risk themselves,” the Treasury statement said.

Although the level of per-event re-tention will depend on the market and whether there have been further terrorist acts, Mr. Atkins said the current intention is that the industrys per-event limit will rise from 30 million next year, to 50 million in 2004, to 75 million in 2005 and to 100 million in 2006.

“In each of those years, there will be [an] annual aggregate limit set for the whole market, which is double the figure for the per-event limit,” he said.

“If an incident takes place, our mem-bers will meet claims in respect of that incident, but they will have a reinsurance recovery from Pool Re beyond their per-event limit,” he said.

Pool Re members, which includes all the largest insurers of commercial prop-erty in the United Kingdom, have strongly welcomed the alteration in the retention, he said. There are about 230 members in total.

“Sept. 11 highlighted new threats from terrorism which were not dealt with by existing arrangements throughPool Re,” said Mary Francis of the Association of British Insurers, in a statement.

“Pool Re is an outstanding example of the public and private sectors working together in the interests of customers. These changes will enable insurance companies to expand the cover they cur-rently offer against acts of terrorism in the U.K.,” she added.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, July 29, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.