A European-wide reinsurance pool should be created to cover terrorist attack losses, say risk managers.

The Association of Insurance and Risk Managers (Airmic) has cautiously backed the Federation of European Risk Management Associations' (Ferma) plan to set up an EU Re by 2002.

The heads of risk management associations in Belgium, Denmark, France, Germany, Italy, the Netherlands, Switzerland and the UK have been contacted to gauge their interest in an EU Re.

Ferma president Thierry van Santen said the association did not consider Pool Re or its French and Spanish counterparts to have sufficient reserves to respond to the current terrorism risk.

"Ferma proposes risk pooling at the European level," he said.

"Such a solution, while being used initially to cover terrorism, could also be used in the future to cover other major incidents or events, such as natural catastrophes."

Ferma has invited the Comité Européen des Assurances to make a joint approach to Brussels on the idea.

It has also encouraged the national risk management associations to approach their own governments on the issue.

Airmic director general David Gamble said the UK association backed the proposal.

"It's something that's needed and in principle we support it," he said.

"There's definitely a problem that needs to be addressed and some of our largest members would like to see a system like that in the EU, but without damaging the status of Pool Re."

Gamble said there were a number of issues that needed to be resolved before setting up an EU Re, such as getting all EU governments to agree on a format and ensuring it had the support of the Central Bank.

He said the UK would not be able to put Pool Re's reserves of between £750m and £1bn into the EU Re because Pool Re acted as a mutual.

"It would be a complex business to unwind Pool Re and put that money into a European system," he said.