The main concern is that CU did not start buying additional reinsurance cover for terrorism on new policies until the turn of this year.
Analysts said CU could be particularly exposed on policies taken out between last April's Baltic Exchange bombing and the new year.
Another prime concern is CU's insurance exposure on the badly damaged NatWest Tower.
The Baltic bomb cost CU pounds 15m. While it was too early to say whether the latest bomb would cost substantially more than last year, a spokesman said: 'We don't expect it to be any lower.'
One saving grace for CU is that it is understood to have recently ceased to be an insurer on the Hongkong & Shanghai building, which may have to be demolished.
CU shares were out of kilter with other composites which, with the exception of Royal Insurance's 1p fall to 325p, firmed by a couple of pence.
Persistent rumours of a big bid and a large buy order handled by Smith New Court put the rest of the market on a firmer footing. Volume trading was healthy, falling just short of 600 million.
The FT-SE 100 index, off 10.5 points in early dealings, closed 10.4 higher at 2,832.7. Second liners, however, were more subdued with the FT-SE Mid index rising just 0.5 to 3134.3.
Fund managers attending yesterday's investment strategy conference, hosted by Kleinwort Benson, predicted Footsie would rise 7 per cent to 3,040 by the year-end and by 13 per cent to 3,190 by mid-1994.
Another talking point was the possibility of a cash shortage among institutions, which are likely to face heavy calls in the coming months from rights issues, the Zeneca demerger and a possible sell-off of all the Government's shares in BT.
ICI eased 3p to pounds 12.34. Salomon Brothers is said to be making a grey market in ICI, currently at 525p, and in Zeneca, at 705p.
The name in the bid frame yesterday was Allied-Lyons, the international food and drinks group. Its shares rose 6p to 587p in the last 15 minutes of trading on talk that Philip Morris or Anheuser Busch of the US was about to strike.
There was also talk that Allied might also make a rights issue along with its 1992/3 results, due next month.
Bid speculation surrounding United Biscuits subsided, and the price eased 10p to 418p. Hanson, the favourite predator, firmed 1.5p to 236.5p.
Elsewhere, a block of 8.6 million Shanks & McEwan were bought and resold by Smith New Court at 183p and 186p respectively. The shares, which closed 6p down at 194p, were sold by one institution and rehoused with several others.
Cannon Street Investments gained 1.25p to 11.5p ahead of today's results and a rumoured capital reconstruction. Huge write-offs and losses are expected.
The leisure sector was active. Euro Disney dropped below 900p, losing 38p to 895p on financing worries and heavy second-quarter losses. David Lloyd Leisure lost some of its flotation shine, easing 6p to 167p.
Owners Aboard held at 11p after UBS, its brokers, forecast pre-tax profits of pounds 27m for the current year after pounds 5m of costs of defending against Airtours' takeover bid.
Forte dropped 2p to 194.5p on a pounds 85m issue of convertible bonds.
Debut dealings in Stagecoach were firm. The shares closed at 124p, a 10 per cent premium to the 112p issue price.
Leading share prices overcame an unsteady start to the day and ended on a firmer note. The FT-SE 100 index, off 10.5 points at one time, closed 10.4 higher at 2,832.7. Second-line stocks, however, were largely unchanged. Account ends on 7 May, and settlement is on 17 May.
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