Pool Re, the state-backed British reinsurer that covers terror attack-related commercial property losses, has £4.5 billion ($7.327 billion) of assets to cover the Olympic Games and is not jacking up premiums for the event.
Bombings or other incidents costing more than that amount would be covered by the British taxpayer under the Pool Re structure, put together in the 1990s when government feared the activities of Irish militant groups could make London property uninsurable and damage the economy.
Pool Re Chief Executive Steve Atkins said his team had closely scrutinized its customers’ exposure to the Olympic Games to prepare itself for a potential attack during the event.
“We wouldn’t normally have interaction with every insurer on every program,” he told Reuters. “But with things like the Olympics we tend to have done that so that if there were anything, we’re already informed about what the insurance arrangements are.”
Pool Re was set up in 1993 after a wave of Irish Republican Army bombings in the City of London financial district threatened to make commercial property uninsurable, stifling investment in the sector.
The reinsurer, which only covers damage to commercial real estate, charges its customers annual premiums and meets claims by drawing on its assets, currently worth about £4.5 billion ($7.327 billion).
It can call on unlimited funding from the taxpayer in the event of bigger losses, and hands 10 percent of its premiums to the government in return.
Atkins said Pool Re had not charged its customers more in the run-up to the 2012 Olympic Games in London because the risk of a terror attack “is very difficult to assess with any degree of accuracy.”
Any increased risk this year, which will also feature public celebrations to mark the 60th anniversary of the British monarch’s coronation, will be partly offset by heightened security measures, he said.
“We take the view that we’ve always got to be there and ready to deal with a terrorist event if it occurs no matter how unlikely it was assessed to be before it occurs,” Atkins said.
The British government currently believes the risks of a terrorist attack are “substantial,” two notches down from the highest “critical” level in its five-tier threat assessment system.
Pool Re’s biggest loss to date is the £260 million [$423 million] it paid out after the Bishopsgate bomb in the City of London in 1993, followed by a £240 million [$390.8 million] hit from the 1996 Manchester bombing.
Losses from the July 2005 bomb attacks on the London transport network are still being finalized, but are expected to reach the double figures of millions, Atkins said.
Pool Re, whose customers include all the major property insurers operating in Britain, has so far never had to draw on the government’s funding backstop.
(Reporting by Myles Neligan; Editing by Andrew Callus)