Pooling ideas on overseas terror

One of the most interesting debates when parliament returns in October will concern the Victims of Overseas Terrorism Bill.

The bill's aim is to put in place a broad-based compensation scheme for UK citizens that are victims of acts of terrorism overseas. It has been put forward by Labour peer Lord Brennan, with strong backing from the families of the Bali bombings and the earlier shootings in Egypt. He has argued that Pool Re, or a mirror of it, should pick up the tab for compensating victims and their families, especially where no adequate travel insurance is in place or even available.

It is not a government bill, but members of all three main parties backed it as it made its way safely through the House of Lords. The government has made it clear that it has grave doubts about the detail of the bill, but it has to agree with the principle, especially with the emotional force lent by the support of victims and their families. So far, it has not been brave enough to kill the bill off, allowing it to be passed by the Lords and to receive an unopposed first reading in the Commons on 13 June. Now the government has to give it time in the autumn to be debated in detail.

Are MPs likely to be fobbed off with a round of 'we support the principle but don't like the detail, so trust us to come back with something more appropriate' by the government? It is unlikely in what could be the run up to an election year, as refusing to help victims of terrorism abroad is not an easy sell on the doorstep.

This means the argument is likely to shift to how compensation should be delivered. Will it be through an extended government scheme like the Criminal Injuries Compensation Board, or by extending the remit of Pool Re as an insurer of last resort and looking to the insurance market to provide the solution? It looks likely that it could be a mix.

This could be the first of a series of extensions to Pool Re's remit of standing behind the commercial insurance market for other catastrophic events.

The government always seems very reluctant to contemplate extensions of Pool Re's role. However, it is hard to see why because it works, having ensured that a viable market for terrorism cover for property survived in the 1990s and doing the same again when the aviation insurance market looked like collapsing after the events of 11 September 2001. It should be an interesting debate.

David Worsfold, Secretary, All Party Group on Insurance and Financial Service.