But terrorism cover may not be available at next renewal, warns ABI

Insurers and reinsurers have reached a temporary compromise on terrorism cover for motor and employers' liability (EL) insurance, but the Association of British Insurers (ABI) is concerned cover will not be available at the next renewal.

On Wednesday, insurance company bosses continued their discussions on how the government may be able to step in to save the situation.

A recent ABI discussion document said reinsurers had threatened to withdraw unlimited liability and terrorism cover for third party motor.

This would have required primary legislative changes to the Road Traffic Act.

The document also warned that, if insurers were to exclude terrorism cover from employers' liability policies, it would leave policyholders in breach of the law.

This week an ABI spokesman said reinsurers were providing terrorism cover for motor and liabilities, but had warned that it was under review.

"Our concern is that it will get more restricted," he said.

"There are no guarantees as far as the future is concerned."

The spokesman said yesterday's talks were part of the ABI's continuing dialogue on the problem.

Reinsurers told Insurance Times that the ABI's reading of the situation was correct, but would not comment on the record.

Groupama commercial director Roger Nash said: "Reinsurers have co-operated to the point where they realised excluding terrorism altogether would cause too much interruption so, for the time being, they have agreed a compromise.

"But ultimately a solution has to be found."

Nash said the solution could involve the government taking full responsibility for covering all terrorist acts or extending Pool Re's remit.

He said the current situation had turned terrorism cover into a competitive business.

However, he said those not due to renew until later in the year were able to continue offering full terrorism cover.

"It's all a little fragmented," he said.