Bunpig, the consortium of insurers involved in the Buncefield oil depot explosion, has rejected an offer from the oil refinery owner to settle 70% of the small claims caused by the disaster, according to sources.

The consortium's lawyer, Kennedys, was approached by Hertfordshire Oil Storage Ltd (HOSL), the joint venture between oil companies Total and Texaco which controlled the ill-fated depot, two weeks ago to pay all claims under £10,000.

The consortium, which includes around 20 of the largest insurers, rejected the offer because it may prejudice any legal action concerning the larger claims.

One insurer said: "The last thing we would want to do is prejudice our losses in terms of bigger cases. But we see this as a positive step in terms of recovery because 70% is a good starting point."

It is understood many of the larger claims will now move towards mediation to achieve settlement, said a legal source.

This news came in the week uninsured victims of the Buncefield disaster were given leave to seek compensation, potentially worth £700m.