Terrorist attack brings fear of ruin to the City: Without government help arepeat of the Baltic Exchange blast will break the insurance companies. Paul Durman reports
Wednesday 09 December 1992
THE GOVERNMENT'S dispute with the insurance industry over who picks up the bill for terrorism is a direct result of the IRA bomb which destroyed the Baltic Exchange in the City. Including re-building work and business interruption claims, the blast will cost the insurers an estimated pounds 750m.
Until this year, insurance against terrorist attack was regarded as a minor and relatively trivial part of the cover which insurers provide. Yet the cost of this one 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. Together with the Confederation of British Industry, the insurers are calling on the Government to help, perhaps by agreeing to bear all claims above a certain level.
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 the largest companies.
John Parry, chairman of the British Property Federation and managing director of the property company Hammerson, said: 'It could drive even the biggest businesses under. One does not want to make this a win for terrorism, none of us do. But the right and proper scheme is an agreement between government and industry, with the Government acting as reinsurer of last resort.'
The bulk of the costs of the Baltic Exchange bomb in April have fallen on the reinsurance companies, such as Munich Re, who insure the insurers. For example, although Commercial Union's London headquarters was destroyed, its exposure was capped at a relatively modest pounds 15m.
The reinsurers feel they are unable to quantify the risk of insuring against terrorist attack and are refusing to renew the cover they offer to insurance companies beyond the end of this month. Without this protection, the insurers say they will be forced to limit cover against terrorist attack to a few million pounds.
In the early months of next year, insurers will continue to be exposed to bomb attacks on their corporate customers even though they are unable to renew their own reinsurance cover. Mr Parry said this raised the question of whether insurers would be sufficiently solvent to pay any claims.
After several months of lobbying Cabinet ministers, the Association of British Insurers last week wrote to John Major to warn the Prime Minister of the grave threat which terrorism poses to the British economy.
Michael Heseltine, the President of the Board of Trade, would like the insurers to find a commercial solution. The compensation scheme which the Government provides in Northern Ireland would be hugely more expensive on the mainland, particularly in London.
- 1 Migrant crisis: Greek soldier saved 20 people singlehandedly off Rhodes beach
- 2 Sofyen Belamouadden murder: The inside story of a crime that horrified Britain
- 3 Company breaks open Apple Watch to discover what it says is 'planned obsolescence'
- 5 UK weather: Britain braced for snow as arctic air mass moves in
Migrant crisis: Greek soldier saved 20 people singlehandedly off Rhodes beach
Ian Brady: Moors murderer announces his support for Ukip and the SNP
Aaron and Melissa Klein: Oregon anti-gay bakers ordered to pay $135,000 after refusing to make cake for same-sex wedding
UK weather: Britain braced for snow as arctic air mass moves in
Bali Nine executions in Indonesia: Death row British grandmother Lindsay Sandiford says she 'just wants to get it over with'
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
£20000 - £25000 per annum: Ashdown Group: Account Payable Assistant - SW Londo...
£14560 - £17680 per annum: Recruitment Genius: Even though their premises have...
£44000 - £48000 per annum: Recruitment Genius: Marketing company based in cent...
£22000 - £25000 per annum: Recruitment Genius: An IT Installation / Commission...