MONTE CARLO, Monaco — Pool Reinsurance Co. Ltd., the United Kingdom’s government-backed terrorism reinsurance facility, has won approval to include cyber risks in its coverage and plans to add the coverage starting on April 1, 2018.
The management team is also in “advanced talks” to add nondamage business interruption coverage, said Julian Enoizi, chief executive of London-based Pool Re.
After two years of planning, the U.K. treasury on Sept. 4 approved the removal of an exclusion barring cyber-related property damage from Pool Re’s coverage, he said.
Mr. Enoizi is in Monte Carlo, Monaco, attending the Rendez-Vous de Septembre reinsurance meeting this week to discuss adding cyber coverage to Pool Re’s reinsurance program, although offering the coverage is not contingent on Pool Re securing reinsurance protection for cyber risk, he said.
The backstop will cover member insurers for claims from remote digital interference, for example, if a hacker gains control of a boiler and adjusts its settings, causing it to overheat and explode, Mr. Enoizi said.
“We added a digital exclusion in the policy when it became a named perils policy in 2002 because at the time there were concerns raised by the Y2K scare, but it doesn’t make sense to exclude cyber for physical damage,” he said. “It’s important that we continue to evolve as terrorism evolves.”
In addition to cyber coverage, Pool Re is looking to add nondamage business interruption coverage to pay claims to businesses that are financially hurt by a terrorist attack but do not suffer property damage. The expanded coverage would respond if, for example, authorities bar entrance to an area after an attack while investigations are completed, Mr. Eniozi said. The government would have to approve an amendment to the Pool Re policy to allow coverage for nondamage business interruption coverage, and there is no timetable for that, he said.
Pool Re was established in 1993 by the U.K. government and insurance industry, and its members include most insurers and Lloyd’s of London syndicates that offer commercial property insurance in the United Kingdom. Since its inception it has responded to 16 attacks and paid £650 million ($857.8 million) in claims. The most recent claims it paid were related to the bombing outside the Ariane Grande concert in Manchester, England, in June.
Under the terms of the coverage, the insurance market collectively retains £150 million, while Pool Re buys £2 billion in reinsurance coverage and has £6.3 billion in funds.