An Exploration of Perceived Effectiveness of the National Terrorism Insurance Scheme in the Post-9/11 Environment: The Case of the UK Pool Reinsurance Company: Volume 1

In 1993, the UK government passed the Reinsurance (Acts of Terrorism) Act to establish a government guaranteed scheme - Pool Reinsurance Company (Pool Re). The step was initiated to respond to the inability of the UK insurance market to offer terrorism insurance to businesses following the IRA bombings in the City. After the 9/11 incident in the US, the global insurance market underwent similar upheaval. The industry cited the changing nature of terrorism to be the main reason behind the crisis. Consequently, Pool Re also had to introduce several changes in the way it insured terrorism risk within its national boundary. The crisis in the international insurance industry is reminiscent of Ulrich Beck's World Risk Society Theory in which he asserts that as contemporary terrorism risk is de-bounded in time, space and socially, it defies mathematical calculation of probability and consequently becomes uncontrollable causing insurance and traditional risk management approaches to fail. He further argues that such crises may increase the calls for newer strategies for insuring global terrorism in the 21st Century leading to the establishment of new international financial institutions through global cooperation. In this context, this research explores the perceived effectiveness of Pool Re in insuring contemporary terrorism to assess its future course on the basis of a robust methodological triangulation involving firstly, an analysis of the 1993 Act and Hansard Report 1990s 2005, secondly, a survey of insurance buyers and suppliers and finally, in-depth elite interviews with senior figures from the UK terrorism insurance market. The empirical evidence from this research supports many of Beck's contentions regarding contemporary terrorism, insurance market failure and the need for government intervention. At the same time, it also reveals that Pool Re, which was originally designed from a national perspective, is still perceived to be effective in meeting its objective of maintaining social and economic resilience in spite of the fact that there is a growing threat from experimental but potentially severe global terrorist misadventures. As a result, currently its displacement by a supranational terrorism insurance scheme appears to be unlikely. To this extent, the empirical evidence appears to be inconsistent with Beck's assertion that national schemes must transnationalize to insure uncontrollable global risk like international terrorism. However, there are indications that some form of cooperation between various sovereign governments may be desirable especially in view of the lack of reinsurance support in the international insurance market for chemical, biological, nuclear and radiological (CBNR) related terrorism losses as well as due to the potential use of nano and gene technology by the terrorists in future. Such cooperation between different national governments may enable them to shift, to the international capital market, the potential financial consequences of physical damages arising from major terrorist attacks which otherwise would have to be retained by the national schemes within their own respective national borders.EThOS - Electronic Theses Online ServiceGBUnited Kingdo