In the event of legitimate claims from a loss resulting from an act of terrorism which is certified by HM Treasury, each Member must first pay losses up to a pre-determined threshold (retention). Only when losses exceed that threshold can the Member claim from our scheme. It is only if these reserves, and the company’s commercial reinsurance, are exhausted that we would require the government facility – a scenario yet to occur in our 26 years of operation.
The guarantee can be understood as a credit facility, that is not capped. HM Treasury will step in to pay claims to their full extent if our funds are insufficient to cover. We are then required to repay from future premium income any funds loaned by the credit facility. As such, in the long term, the arrangement runs at nil cost to the taxpayer, who has in fact benefitted from the arrangement to date insofar as Pool Re pays a premium to HM Treasury for is guarantee, and taxes, both of which can be used to invest in public services.
Fund has been built up by Pool Re to meet Potential claims.
As at 1 June 2019
To date, Pool Re has paid out £635m,
equivalent to £1.25bn adjusted for inflation.