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LONDON -- British academic institutions are obtaining more terrorism coverage at less cost through a unique mutual insurance facility.

UM Assn. (Terrorism) Ltd., or UMALT, was set up in 1993 to provide U.K. academic institutions with an alternative to the U.K. government's terrorism insurance program. The specialized pool -- which currently includes 79 British academic institutions, including the country's top 10 universities -- is managed by UM Services Ltd., which also manages mutual insurer UM Assn. Ltd., or UMAL, which writes general property coverage. All three companies are based in London.

Lloyd's of London's syndicate 33, managed by Hiscox P.L.C., is the lead underwriter for a reinsurance program covering the pool.

The Hiscox program provides up to L50 million ($85 million) of coverage per member institution above a L25 million ($42.5 million) retention per occurrence retained by the pool, said Susan Wilkinson, executive director of UMALT.

Institutions with a higher exposure -- such as because of the nature of their building construction or the presence of valuable equipment -- may purchase excess coverage of L60 million ($102 million) above the initial L75 million layer, Ms. Wilkinson added.

Ms. Wilkinson said the premiums paid for this coverage are only about 33% of those that academic institutions would have paid to Pool Reinsurance Co., the terrorism reinsurer operated jointly by the U.K. government and the insurance industry.

Terrorism coverage for British academic institutions previously was placed with Pool Re, but only with limits of L25 million.

"The major selling point is more capacity," said Philip Perry, terrorism underwriter at Hiscox. The UMALT insurance program covers physical damage and business interruption from fire and explosion following terrorist attack.

The insurance does not cover any damage inflicted by pressure groups such as animal rights activists. Damage caused by such groups is deemed malicious damage and is covered under general property insurance policies, Mr. Perry said.

So far, UMALT has generated savings of L25 million in premiums compared with what the pool's members would have paid for terrorism insurance, Ms. Wilkinson said. She declined to give a figure for the reserves held by the company.

Since UMALT was created in 1993, there have been no terrorism claims made by British academic institutions.

"We have created two vehicles (UMALT and UMAL) to retain risk in a mutual pool. We are able to operate as a very successful company. It's an extremely efficient risk transfer vehicle," Ms. Wilkinson said.

There are also significant prospects for growth. The mutuals currently cover 79 academic institutions in the United Kingdom, compared with a total of 140 such institutions in the country.

"If all the universities bought together through this vehicle, it would have the effect of reducing costs tremendously," Ms. Wilkinson said.

Currently, the terrorism risk to British academic institutions is relatively low, said Mr. Perry of Hiscox. "Irish terrorism is the most obvious exposure, but there is also serious exposure from the Arab world. London is the base for many (Middle East political) groups," he said.

But universities and colleges are not typically regarded as primary targets for terrorism. Rather, they could be subject to collateral damage from nearby fires and explosions due to terrorist acts.

Mr. Perry added that there is also a wide disparity in the premiums paid by the various institutions. "People in London can pay up to 10 times as much as those in the regions," he said.

Universities in major cities, such as Manchester and Birmingham, pay approximately one-half of the rates paid in London. "It's related to perceived exposure," Mr. Perry explained.