The likely scale of claims is certain to push up terrorism insurance premiums for thousands of businesses throughout the UK next year.
Those who already have cover are having to meet an additional levy of about two-thirds the premiums they have paid. The 40 per cent discount they received on their policies only applied as long as total claims on Pool Re, the Government-backed insurer of last resort, did not exceed pounds 75m this year.
In Manchester, the institute said the scale of individual insurance claims so far assessed by its members ranged between pounds 25,000 for small units to more than pounds 60m for one store, believed to be a Marks & Spencer, close to where the blast took place. A substantial proportion of total claims were likely to be related to business interruption rather than damage from the bomb explosion itself.
A spokesman from the institute said: "There are still many imponderables to be resolved, such as what happens to the Arndale Centre [the shopping mall], which was badly damaged by the blast but not completely destroyed. The owners will have to decide what to do with it before the extent of all claims can be fully calculated."
Speaking about the Arndale Centre, Philip Heron, northern regional manager for Thomas Howell Group, a leading firm of assessors, said: "The cost of rebuilding the centre from scratch would probably be in the region of pounds 260m by itself."
The Manchester blast is seen by some experts as unique in that, unlike the Isle of Dogs bomb earlier this year and the two City explosions in 1992 and 1993, it affected mainly retail-shopping facilities rather than offices.
Although it is possible to minimise business interruption claims relating to offices, simply by relocating staff, this is less likely for retail units, leading to higher insurance payouts.
A further problem comes from the heavy under-insurance in the wake of the IRA ceasefire in 1994. At Canary Wharf, which suffered damages of up to pounds 150m, up to one third of businesses had no terrorism insurance, leaving them to meet all costs over pounds 100,000.
A spokesman for the Association of British Insurers, the industry trade body, said it would not be possible to give an indication of the extent of under-insurance in Manchester for security reasons.Reuse content