Office of Fair Trading to investigate Pool Re

The Office of Fair Trading (OFT) has launched an investigation into Pool Re, the terrorism insurer created by the government to provide cover against IRA attacks, according to a report.

The regulator is said to have written to 25 insurers asking for details of how competitive Poll Re is in underwriting their terrorism risk.

The company was originally set up because no one else would provide cover against IRA attacks. It was founded following the Baltic Exchange bomb in the City ten years ago.

The report said the probe had been prompted by regulations at Pool Re requiring members insuring commercial property against fire and explosion to reinsure their entire portfolio of such terrorism insurance with Pool Re.

Pool Re requested a decision from the OFT that the revised arrangements do not infringe its rules, said the report.

Pool Re are said to have notified the OFT of the changes voluntarily.

OFT spokesman Graham Miles said in the report: "They had concerns about the competitiveness of them. We are looking at this. We have up to a year to consider it."

According to the report, other insurers have said the probe was absurd, given that Pool Re was set up as a monopoly supplier.

Pool Re is the main reinsurer of London terrorism risk, the report said. Last year it expanded its remit to cover 11 September-type attacks and nuclear and biological warfare, as well as damage caused by fire and explosions.