To ask Mr Chancellor of the Exchequer, what the anticipated dividend payment to the Government and the insurance industry from the assets managed in the Pool Re scheme in 2014-15 is; and if he will make a statement.
The total value of the Pool Re fund was £5.504 billion as at 30 September 2014.
The government has provided a guarantee to Pool Re since it was established in 1993. Last year Pool Re and HM Treasury agreed a package of reforms that provides for fair and proportionate compensation for taxpayers for the continued provision of the guarantee. These reforms will see HM Treasury’s fee increased from 10% of Pool Re’s annual premium income to 50% - an increase that we estimate will raise an additional £120m per annum. In addition, the reforms will see Pool Re make a distribution to its members and the government based on any annual surplus that it makes. Whilst the occurrence and level of that surplus are subject to inherent uncertainty, based on Pool Re’s recent results we estimate that this will see insurers who reinsure terrorism insurance risk with Pool Re and the government each receive an additional payment of approximately £55 million per annum.
The changes took effect from 1 January 2015. In total, we estimate that these changes will raise an additional £50m for the Exchequer in 2014/15, and £175m per year thereafter, compared to the previous agreement.