Bombing your way to the negotiating table?
What follows, by ‘Owen Catchpole’, was distributed by Dr Sean Gabb on the Net in February. It has been slightly edited.
In Northern Ireland, by law, compensation for damage caused by terrorist bombs always has been payable by the government. For that reason commercial insurance policies in NI have, since 1972, been subject to what is known as the Northern Ireland Overriding Exclusion. This says that the insurance does not cover terrorist damage. There is no such law in Great Britain and so insurers pay for terrorist damage in Great Britain. After the bomb in the City of London at the Baltic Exchange, the insurance companies announced that they were going to introduce an equivalent to the Northern Ireland Overriding Exclusion, thus leaving property-owners in Great Britain uninsured against the risk of terrorist damage.
The government was horrified at this, knowing that it would have to agree to pay itself, for if it did not do so every major financial institution would leave London. A compromise solution was then agreed. The government set up an organisation known as Pool Re, which in effect was a reinsurance company with which commercial insurers could reinsure their terrorist-damage risks above a certain level. Given access to Pool Re the commercial insurers agreed to continue to cover terrorist damage risks.
There then followed a huge bomb in the City. The commercial insurers paid for the damage and claimed most of the cost back from Pool Re. The government was thus possessed for the first time of an accurate figure for the cost of a major bomb in London. Incredibly, they released that information. The figure was half a billion pounds. The government then made the point that the cost of this single incident equalled the cost of all property damage caused by terrorists in NI over the previous 30 years.
The IRA now realised that with just a couple more bombs they could bankrupt Pool Re and in effect bankrupt the government. So also did the government, and at that stage the serious talking began and a cease fire was achieved. When the talks faltered, the cease fire was broken with the bomb at Canary Wharf in Docklands. This time the damage was even greater: the figure was a full billion pounds. The government made further concessions and the present cease fire was achieved.
So the bargaining counters were not human lives, for the 3000 killed in NI counted for relatively little because life is cheap. (Average value of a human life no more than £100,000, as paid in compensation by the government.) What counted was plain old-fashioned money. The government was faced with the stark choice between paying out bomb damage compensation at the rate of a billion or so pounds a month, which no government could afford to do, or else refusing to pay and then seeing the end of the City as a financial centre.