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TERRORISM RATES UNDER REVIEW

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LONDON -- The deadly bombing this month in Omagh, Northern Ireland, has caused Lloyd's underwriters to reassess terrorism insurance rates in the United Kingdom.

In Northern Ireland, a U.K. government program provides terrorism coverage, and Lloyd's of London provides coverage for the difference between commercial property risks' declared values in the U.K. program and their market value at the time of the loss.

Pool Reinsurance Co. Ltd., an insurance company pool, writes terrorism insurance in England, Scotland and Wales.

"Obviously we need to ascertain how far the (terrorist) network in Northern Ireland operates over here (on the mainland)," said Ben Garston, senior underwriter responsible for terrorism at Lloyd's of London's Wellington Underwriting Agencies Ltd.

The bombing in Omagh killed 28 people and injured more than 100. There is no estimate to date of total property damage in Omagh.

The Real IRA, a dissident faction of the Irish Republican Army, claimed responsibility last week for the 500-pound car bomb. Security experts believe the Real IRA has about 100 members. It opposes the Good Friday peace agreement signed by the British and Irish governments and the main armed groups in Northern Ireland.

Pool Re is in the midst of its annual rate review, which it conducts with participating companies and the U.K. government. But as the company writes coverage only for England, Scotland and Wales -- not Northern Ireland -- the Omagh bombing will have no direct effect, said Leslie Lucas, Pool Re managing director. "We are still going through the rate review process and looking at claims experience."

Pool Re's last losses were in 1996, when IRA terrorists bombed Canary Wharf, a development in London's Docklands area in February and downtown Manchester in June of that year (BI, Feb. 19, 1996; June 24, 1996). Mr. Leslie said the Docklands bombing caused claims of L105 million ($169.7 million), while the Manchester event brought L285 million ($460.7 million) in claims.

Commercial demand for terrorism insurance in England, Scotland and Wales has remained steady prior to the Omagh bomb and despite this year's peace agreement.

Also, terrorism has not abated. There have been killings and bombings in Northern Ireland since the peace agreement was signed.

Lloyd's underwriters are offering coverage at rates between 10% and 20% lower than Pool Re. Wellington set up the first facility as an alternative to Pool Re in 1994. Pool Re began to discount premiums in 1995, introducing a deposit premium, under which policyholders paid 60% of the total premium and paid the remaining 40% only if total claims against the pool exceeded L50 million ($80.8 million), Mr. Lucas said.

In 1996, Pool Re offered a 20% discount on the up-front payment requirement of 60% of premium, while the threshold for claims that would trigger payment of the remainder was raised to L75 million ($121.2 million). After the Docklands and Manchester bombings in 1996, Pool Re's 1997 premiums were required to be paid in full.

For this year, Pool Re offered discounts of 20% in its so-called A and B zones of highest risks, such as urban downtown areas, while discounts of 40% were offered for the country at large. The 1999 premiums will be decided by late October this year, Mr. Lucas said.