The French government has bowed to pressure from insurers and agreed to create a state-sponsored pool for terrorism risks.

France's biggest commercial insurers threatened to withdraw from the commercial market if state reinsurer Caisse Centrale de Reassurance (CCR), did not extend its remit to terrorism.

French insurers are forced by law to cover terrorism with all property risks.

The Federation Francaise des Societies d'Assurances announced last week that the CCR would cover terrorism losses above an annual accumulated level of £1.5bn.

No upper limit was set and the insurance market will cover losses up to that amount.