Demand for insurance is soaring in the US as thousands of businesses rush to plug gaps in their cover despite rapidly rising rates.

US Insurance Information Institute chief economist Dr Robert Hartwig said: "One survey recently found 12% of businesses in lower Manhattan had little or no insurance other than the legally required minimum for workers' compensation coverage."

After the destruction of the World Trade Centre and other buildings in lower Manhattan, many businesses found they were uninsured or had the wrong cover, he said.

He predicted demand for commercial premiums would rise by up to 10% in a market where rates were rising by about 30%.

"Those businesses that were previously uninsured will go out and buy insurance. That's the 12%. What we will see even more of is businesses plugging the gaps in their coverage."

Analyst Chris Hitchings of Commerzbank said an idea of the scale of underinsurance in New York could be gained by comparing estimates for the damage done in Manhattan with insurers' total net losses.

Estimates of the cost of rebuilding typically fall between $30bn and $70bn (£21bn and £49bn).

Individual insurance companies have reported losses totalling less than $30bn (£21bn).

Some commentators have suggested the difference suggests insurers' loss estimates are set to rise further.

Hitchings said: "The $30bn to $70bn estimates are top down ones - they are looking at what it would cost to rebuild buildings.

"The fact is insurers are limited by limits on the policies.

"This gap between what insurance companies are saying and top down estimates isn't a measure of how much the estimates have got to rise, but of how much the loss isn't covered by insurance."

PricewaterhouseCoopers' US accounting and auditing head Patrick Shouvlin estimated the gap was about $20bn (£14bn).

He said US industry watchers were worried Lloyd's and big reinsurers may have to pick up even heavier bills than currently thought.

He told Insurance Times: "There's still uncertainty as to where the gap is between the estimated losses for the industry from 11 September and the amount of reported losses by the individual insurance companies."