Pool Reinsurance Company Ltd, known as ‘Pool Re’, was established in 1993 to provide reinsurance for ‘Acts of Terrorism’ insurance underwritten by its Members. It is a Government backed scheme that is designed to reinsure commercial property or residential risks insured in the name of incorporated companies and organizations (the intention being to exclude residential risks insured in the name of private individuals) providing protection against losses as a result of loss of or damage to property, the cause of which is an Act of Terrorism. Individuals who are sole traders, business partners, trustees, executors of a will (or beneficiaries of such trust or will) are not classed as private individuals by Pool Re provided they do not occupy the insured property for their own residential purposes. Reinsurance cover does not apply to bodily injury, nor to losses not involving physical damage to property.
An Act of Terrorism means acts of persons acting on behalf of, or in connection with, any organisation which carries out activities directed towards the overthrowing or influencing, by force or violence, Her Majesty’s government in the United Kingdom or any other government de jure or de facto.
Ageas is a member of Pool Re and abides by its covers, rules and rating structures. One of the key principles for cover to be operative is the non selection principle (also known as the adverse selection principle).
The main provisions of this rule are as follows:
An Insured cannot choose to effect Terrorism cover on a single property that is eligible for Terrorism cover where multiple eligible properties are insured on one, or a number of policies, regardless of whether these policies are with one or multiple insurers. This will include some policies that are not placed through the same brokers and/or distribution routes so needs to be captured in customer fact finds if Terrorism cover is requested. This includes eligible properties of all the business entities, e.g. subsidiary companies unless such subsidiaries have full control over their own insurance arrangements.
Whilst it is not considered a breach of the non selection principle if an Insured elects to exclude all their residential risks e.g. rented flats and houses from their Terrorism cover, a building which has mixed residential and commercial occupation (where more than 20% is commercially occupied ) are considered by Pool Re as commercial risks and must therefore be included, where other eligible property is also covered for Terrorism.
The following are permitted departures from the non selection principle:
Where an Insured:
is responsible as a tenant for insuring the building or
is required by the mortgagee to insure the building or
is responsible as contractor or employer for insuring contract works and/or other property or
is party to a similar legally binding contractual agreement, not of their own drafting,
and is required under the terms of the contact to effect Terrorism cover such insurance is permitted without requiring Terrorism cover to be effected on other property belonging to the Insured, provided that the Insured purchases Terrorism cover for all such contractual obligations, and not only for selected ones.
These should be treated as companies in their own right and the non selection principle will not apply to the participating companies involved in the joint venture.
These will not be subject to the non selection principle other than for their own property.
The non selection principle does not apply to a company and its pension fund as related companies. A pension fund is regarded entirely separate in law and therefore may make decisions to purchase Terrorism cover independent of its founding company.
Diplomatic premises are eligible for Pool Re cover, however where an Insured has a portfolio of premises which include a diplomatic premises and the tenant is relying on their ability to recover for an Act of Terrorism under the terms of the Vienna Convention, and is refusing to pay the Terrorism premium, Pool Re would not consider the Insured to be in breach of the non selection principle if such premises were not included on the property schedule insured for Terrorism cover.
Where the Insured is a lessee holding property on lease from another, and
- under the terms of that lease is required to insure the buildings (and rent) against fire and/or explosion damage arising from terrorist activity with a named insurer; and
- the named insurer is a Member; and
- the landlord under the lease has effected Terrorism cover with a Pool Re Member on all properties for which the landlord is responsible for arranging such insurance
Terrorism cover in respect of the property will be reinsured by Pool Re notwithstanding that the lessee has elected not to obtain Terrorism cover on its other assets (in which it has an insurable interest) with a member
Where it can be shown that a composite Insured has only a financial interest e,g, providing a loan facility only, in the contract and is not effecting ownership, control, nor having an interest in the day-day operational element of the risk, it is permitted for the composite Insured not to affect Terrorism cover for their other assets.
Where a subsidiary company is ultimately owned by the same parent or holding structure but there is no central control of insurance matters and each subsidiary has control over its own insurance arrangements, it is accepted that each subsidiary is not constrained by the decisions of another and it will therefore not be a breach the Adverse Selection rule should they choose not to purchase Terrorism cover.
The Terrorism cover provided by Pool Re excludes all cover in relation to cyber Acts of Terrorism. With effect from the 1st April, 2018 however an exception to this exclusion applies which means that an element of cover is provided for such Acts of Terrorism, referred to by Pool Re as losses triggered by ‘remote digital interference’.
This exception is intended to allow for the recovery of loss where the cyber Act of Terrorism proximately causes damage to or destruction of insured property by direct result of certain specific perils or mechanisms i.e. fire, explosion, flood, escape of water, impact of aircraft or vessel, destruction of or damage to or movement of buildings, structures, plant or machinery other than computers.
The extent of loss covered is:
Damage to data and losses flowing from damage to data however is not covered and the same applies to money, electronic cryptographic or virtual currency including Bitcoin or anything similar, negotiable or non-negotiable instruments, financial securities or any other financial instrument of any sort whatsoever
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