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Law360, London (April 30, 2020, 4:46 PM BST ) The U.K. government should release £6.6 billion ($8.1 billion) in funds from its state-backed terrorism reinsurer to compensate businesses reeling from the U.K.-wide coronavirus lockdown, a trade body for the leisure industry said Thursday.
The Night Time Industries Association and its insurance broker NDML have written to U.K. chancellor Rishi Sunak, to propose the release of reserves from Pool Re to pay business interruption claims for companies forced to shut.
The trade body for nightclubs and live music venues, which is weighing legal action against insurer Hiscox over claims rejections, said the solution would avoid "crippling insurers with unmanageable business interruption pay-outs, putting the insurance industry itself under serious strain."
"We've pushed and challenged insurers but have reached an unmanageable deadlock," Simon Mabb, NDML's managing director, said. "We truly believe this is an opportunity that can future-proof pandemics, and create a solution for today, as well as a plan for tomorrow."
The sentiment echoes that behind the creation of a "steering group" of insurance bosses under Pool Re earlier in the month, with the potential goal of creating a state-backed pandemic reinsurer.
Pool Re was created following the Irish Republican Army attacks on London in 1992. At the time, most U.K. insurers were found to have stripped back commercial cover, potentially leaving businesses exposed to major terrorism losses in the future.
Pool Re relies on all insurers that are members to contribute for major property losses caused by terrorism, sharing the risk of a single incident with the wider market.
If that is not enough to pay out on claims, the reinsurer has a £6.6 billion reserve fund built up over the years through annual contributions. The reinsurer can draw on unlimited loans from HM Treasury if that reserve becomes exhausted.
Last month, a state agency said Pool Re could be classified as part of the central government by April 2021. That raised concerns among insurers that the £6.6 billion industry assets would no longer be controlled by independent insurance experts, but by the government.
A spokesperson for Pool Re did not immediately respond to a request for comment over the proposals by the NTIA.
Insurers are facing the prospect of litigation from hundreds of small businesses denied claims under their business interruption policies.
Law firm Mishcon de Reya, which already is representing 200 businesses acting against Hiscox, on Wednesday formed a second group to examine claims against "more than a dozen" other insurers, including AXA, RSA, Zurich and QBE.
The firm has called on other claimants to join the group, named the Hospitality Insurance Group Action, and said it has appointed Philip Edey QC, of Twenty Essex Chambers, to examine policies.
--Editing by Alyssa Miller.
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