Taxpayers were at one time expected to pick up a bill for pounds 200m- pounds 300m under the Government's arrangement to act as a backstop to limit the cost of terrorism to the insurance industry.
But Pool Re, the specially created terrorism reinsurer, has collected enough premiums to prevent the Government having to make any contribution towards the pounds 500m cost of the Bishopsgate bomb. The IRA's April attack on the City is responsible for most of this year's claims.
It is understood that this result will enable Pool Re to forgo seeking a further rise in premium rates for terrorism cover from its corporate customers. In the aftermath of the Bishopsgate bomb Pool Re increased its rates for the central London buildings considered most at risk by up to 300 per cent. Pool Re is anxious to avoid a rise in premium costs while the Government is pursuing peace talks over Northern Ireland.
Insurers have collected about pounds 300m of insurance premiums to be passed on to Pool Re. Under the deal struck with the Government last December the insurers must also meet additional costs equal to 10 per cent of the sum collected.
The cost of much of the rest of the bomb damage was not covered because insurers exempted the first pounds 100,000 of claim under various headings.
Until recently the Government faced a pounds 50m bill from backing Pool Re's provision of so-called run-off cover to insurance companies. Buildings fully covered against terrorist attack under the old terms exposed insurers to enormous claims if there had been a bomb during the months of 1993 when they were 'on risk'. Pool Re agreed to offer insurers run-off cover against this risk, since commercial reinsurance companies have refused to accept terrorism exposure.
However, premiums paid for run-off cover in the months since the Bishopsgate bomb have generated enough cash to avoid a call on the Government.