A rift between some of the world's biggest insurers has been exposed by the creation of a specialist terrorism property company.

Zurich Financial Services, XL Capital, Swiss Re, SCOR, Hannover Re and Allianz have set up the company, called Special Risk Insurance and Reinsurance (SRIR).

The Luxembourg-based operation has been set up with €500m (£305.9m) and coverage is limited to €275m (£168.3m) in any 600m radius around an insured property.

It does not cover business interruption and will focus on continental Europe.

But SRIR's creation comes after other leading players had called for governments to underwrite terrorism risks.

Germany's Munich Re has been at the forefront of attempts to persuade the government to set up an equivalent to the UK's state-backed terrorism risk scheme, Pool Re since the 11 September attacks.

A Munich Re spokesman said: "From the very beginning we've said this new risk dimension cannot be borne by private insurance companies.

"The private sector will always have to limit its liability. You can't take on a liability which endangers the existence of your own company."

Swiss Re's corporate vision is significantly different.

A spokeswoman said: "Swiss Re is committed to a public/private partnership in the short term, but the role of the state should ultimately be diminished and eventually be totally unnecessary."

In the US, President Bush threw his weight behind calls for more terrorism cover.

"You can't borrow money unless there's adequate terrorism insurance," he said.