Government will continue to pay Ulster bomb costs

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AS CONTROVERSY continues over possible compensation payments for IRA bomb attacks in Britain, the Government said yesterday that it will continue to pay for terrorist damage in Northern Ireland.

The expected damages claim of pounds 750m for the bomb at the Baltic Exchange in the City of London last April - including rebuilding and business interruption claims - is bigger than all the property compensation payments in almost 25 years in Northern Ireland.

Because of that massive loss, insurers will start to refuse cover for terrorist damage to commercial property in Britain from the new year. They argue that the Government should pay.

In Northern Ireland, a total of pounds 657m has been paid for terrorist damage caused by almost 10,000 explosions since 1969.

Until this year, insurance against terrorist attack in Britain was regarded as a minor and relatively trivial part of the cover which insurers provide. Yet the cost of the Baltic Exchange incident is a third of the pounds 2bn or so of premiums which industry pays each year for protection against all other forms of risk.

Faced with this scale of potential loss, the insurers - already weakened by years of heavy losses - say they cannot afford to offer substantial amounts of cover against terrorist attacks.

Without insurance, major companies will be left at the mercy of the IRA. The cost of replacing a multi-million pound factory or office block could threaten to break even the largest companies.

Claims experts in Belfast said privately yesterday that they had been surprised by the City of London bill. One source pointed to a bombing in January that caused serious damage to Belfast's largest building, the 20-storey Windsor House. Claims from the various occupants are expected to be about pounds 1m.

An earlier bombing of the same building several months ago produced claims that totalled well under pounds 1m. Claims of more than pounds 5m are rare.

Since the Seventies, the Government has assumed the responsibility of meeting criminal damage claims in Northern Ireland. While there have been complaints of excessive red tape and slowness in payments, the system is generally thought to work.

On top of those for criminal damage, payments for criminal injury have totalled a further pounds 220m. The damage bill for 1991-92 was pounds 33m, but that has risen sharply recently as the IRA has placed renewed emphasis on attacking commercial targets in Northern Ireland. About pounds 47m has been paid out since April.

The 1992-93 estimate was pounds 38m, raising the question of whether the extra money would come from London or be taken from the overall Northern Ireland budget, which this year stands at pounds 7,460m and includes money for education and other services.

The Secretary of State for Northern Ireland, Sir Patrick Mayhew, offered reassurance yesterday when he said that under a new arrangement with the Treasury, only some of the additional money would come out of the local budget.