Premiums for terrorism cover are unlikely to rise despite the Real IRA planting a bomb outside the headquarters of the BBC this week, claims a leading underwriter.

Alistair Sandilands, terrorism underwriter for Hiscox, said rates would remain largely unaffected in the short term.

He added that the bomb had triggered an instant demand for terrorism cover.

“We have been besieged by calls from brokers,” he said.

According to Steve Atkin, chief executive of Pool Re, the government-sponsored reinsurance scheme, terrorism insurance was profitable in 2000, largely because there have been no major IRA attacks since 1996.

At the moment Pool Re holds 80% of the terrorism insurance market, and the scheme wrote premiums of £51m

in 1999.

Pool Re was set up in 1996, when fire insurers began to withdraw additional terrorism cover during the last major IRA bombing campaign.

A number of insurers took part, including Royal & Sunalliance, CGNU, Zurich and Axa.

An “alternative market” was set up at the same time by Hiscox and Lloyd's syndicates.

However, the number of other insurers offering the cover fell drastically in 1998, when premium rates dropped by 70%, due to decreased demand for the cover.