BRITISH insurers will cover up to £75 million in losses from Thursday’s bomb attacks and face a bill of as much as £150 million if more terrorist attacks occur before the end of the year.

It is thought that the insurers covering the damage from the bombings are reinsured with the Government’s mutual insurer, Pool Re, which was set up in the wake of the 1992 destruction of London’s Baltic Exchange by an IRA bomb.

Under Pool Re’s rules, the insurance industry must cover up to £75 million in damage from any one terrorist attack and the first £150 million in total damages if there is more than one attack in a year.

These set costs, known as retentions, are shared between all insurers that reinsure with the mutual, depending on the amount of terrorism risk they underwrite. The individual retentions held by each insurer involved in covering damage caused by Thursday’s attacks will be added together and Pool Re will cover losses above that amount.

Retentions for the industry will rise to £100 million per event and £200 million for the year from January 1 as part of a 2002 agreement between the Government and insurers over the structure of Pool Re.

But experts said yesterday that they did not expect the bill from the bombs in the capital to be much higher than £20 million unless there is substantial structural damage to the Tube network.

The insured losses from the terrorist attacks in Madrid last year that killed 191 people came to a similar sum, most of which was paid by Spain’s own pool, Consorcio de Compensación de Seguros.

Theo Butt, terrorism placement team leader at Marsh Global Markets, a division of Marsh, the world’s largest insurance broker, said yesterday that underwriters had frozen the cost of terrorism cover in Europe while they waited to see whether there would be more attacks.

“Underwriters will be offering no reductions on major European risks for the next 30 days,” he said. “If this does herald an upsurge in attacks, rates may change.”

Mr Butt said that Thursday’s bombings may cause the US Government to reconsider its plans to reduce the American terrorism insurance pool, known as Tria, because it was created under the Terrorism Risk Insurance Act 2002. Tria, set up after the terrorist attacks of September 11, 2001 caused reinsurers to withdraw terrorism cover, was originally due to reduce greatly the protection it offered insurers at the end of this year.

On June 30 a US Congress report recommended that Tria’s trigger — the value of losses needed before insurers can call on the pool — should rise from $5 million (£2.9 million) to $500 million and that the retentions held by insurers should increase.

The deductible held by each US insurer is a percentage of the company’s entire property and casualty premium intake for that year. Insurers also cover a further 10 per cent of the loss, on top of their deductible.

Austria, France, Germany, the Netherlands set up terrorism insurance pools after the 9/11 attacks in the United States. Switzerland also has a pool and there are plans to start one in Italy.

Before the Madrid bombings last year, the Consorcio’s largest loss was nearly €15 million (£10.3 million) for 46 claims arising from the 1982 bombing of the main telephone exchange in the Spanish capital by Eta, the Basque separatist group.