The Association of British Insurers (ABI) and UK risk managers’ association AIRMIC have both welcomed the UK Treasury’s decision to expand Pool Re. The decision to broaden Pool Re’s scope came after the September 11 terrorist attacks, when many insurers and reinsurers stopped providing terrorism coverage.

From January 1 it will expand beyond its previous limits of terrorist-caused fire and explosion damage to cover. It will be expanded from January 1 next year to cover a wider range of risks including bio-terrorism, nuclear contamination, impact by aircraft and flood damage.

Although it still excludes war damage and virus and hacker attacks from its coverage, the scheme is seen by the insurers and risk managers as a much better arrangement.

John Parker, head of general insurance at the ABI, said the scheme is “a good deal all round. There is something in it for policyholders, insurers and the government.”

September 11 changed the notion that fire and explosion are the biggest causes of terrorism damage to commercial property. Mr Parker said the scheme gives greater coverage for policyholders. “What we have now got is a much more modern, updated system for dealing with terrorism risks.”