Neil Hamilton, the corporate affairs minister, telephoned Ian Rushton, chairman of the Association of British Insurers, yesterday to tell him a new schedule of premium rates must be introduced from 1 July. The insurers had thought the Government was backing down on its demands, which it is feared could lead insurance costs in the City of London to rise by up to 300 per cent.
A Department of Trade and Industry spokeswoman said some businesses in the provinces would see premiums fall. Insurance costs for large buildings will still be less than 1 per cent of total occupancy costs.
But the ABI, the Confederation of British Industry and others fear a premium hike may be counter-productive because it will encourage more companies to go without insurance.
Some 20-30 per cent of businesses in London and other large cities are already taking the risk of not insuring against terrorism, and in the provinces the proportion without protection rises to 70 per cent or more.
The Government is exposed to the estimated pounds 400m cost of last month's Bishopsgate bomb attack because of its agreement with the insurance industry under which it will meet the bulk of the costs above and beyond the pool of terrorist insurance premiums collected by Pool Re, a specially created reinsurance company.
Pool Re is expected to receive terrorist premiums of little more than pounds 200m, much less, it is believed, than civil servants promised ministers.Reuse content