Examination of Witnesses (Questions 780
WEDNESDAY 10 APRIL 2002
780. Just one final question, maybe it is
for you, Mr Wood. You have already said the measures in place
in the City of London are very robust but should they be extendedI
am not aware that they have beento, I do not know, Birmingham,
Manchester, Leeds, Glasgow, Edinburgh?
(Mr Wood) Again, I think there are measures that are
consistent across all 43 police forces that relate specifically
to how they are going to deal with a heightened increased threat,
as there are in military and other areas, but I am not so convinced
that they are of the same degree as they are in the City of London.
That is a much more clearly defined square mile in which you can
actually police with ease, you have got specific points of entry
and other issues that go with it. Trying to take and replicate
exactly the same measures in some of the other major cities would
be probably seen as an infringement of public liberty as well.
781. But your problem is simply this: I
am no terrorist but if I could not do what I wanted to do because
of all the measures that have been set up in the City of London
I would go somewhere else. I would go to Leeds, Leeds is a wonderful
place to do whatever Leeds people do. How do you react then?
(Mr Wood) Again, I come back to the point that I touched
on earlier, good timely intelligence to be able to thwart these
(Mr Sharp) Can I just say that probably within about
six weeks of September 11 the City of London Police, and I think
the Metropolitan Police, were involved with the private sector
in running a scenario exercise in exactly the same terrorist type
situation, so they had gone through the thinking process, played
the model out, as part of the learning process of what do we now
do, what do we now need to change.
(Mr Wood) And undertook a number of awareness presentations
and initiatives to get the security community to understand that
the risk was there and actually aimed some of those at senior
chief executives of companies. I think that continued awareness
campaign is worthwhile and needs to continue.
782. I am not so sure that everyone would
agree that the insurance industry should wash its hands of serious
(Mr Gamble) I did not say serious threats, I did say
783. Terrorism is very serious.
(Mr Gamble) Do not forget, I am a buyer of insurance,
I am not an insurer, so I am not on their side.
784. I was thinking of the Troika scheme
in the United States where you are on your own and if your aircraft
are blown up the customer has got to cough up. You now say the
insurance industry is saying "if there is a terrorist act,
we are out of it". I am not certain that the taxpayer should
necessarily have to pick up much of the bill. The arguments you
gave, I could understand those arguments if I was an insurer or
if I was a private company, and I rarely speak in support of the
Treasury but I can understand some anxiety that the insurance
industry should make its profits, and fairly large profits, over
many years but when the going gets really tough "thank you
very much, but somebody else has got to take up the cudgels".
(Mr Gamble) I think there are lots of areas where
you can quite rightly attack the insurance industry for doing
that, maybe connected to flooding or something of that nature,
but when it comes down to facing completely uncapped liabilities
then there is really no company in the world that could meet a
trillion dollar loss, for instance, which was the point that Warren
Buffett made from Berkshire Hathaway which is one of the great
insurers in the States. That has to eventually come down to society
meeting it. The fact is that at the moment the Treasury since
1993 has never had to pay out and has, I think, received more
than £250 million in payment from Pool Re, quite rightly
because they are acting as the insurer of last resort and so they
should. If we can get more premiums being paid in, and remember
that is very important, we are not asking for charity, we are
saying that there will be premiums paid in and that will build
up to maybe three or four billion pounds, we would very much hope
that the Treasury will never be required to pay but if there is
another huge attack, like the World Trade Centre, you will be
in a situation where emergency powers will have to be taken out
anyhow and the Government will have to get involved. It just seems
to us so much better to get involved in this front end way where
already we have got Pool Re established and it has worked well
and the public purse has not had to pay out to date.
Chairman: A slight variation on George Bernard
Shaw: I accept the principle but it is the amounts perhaps that
need to be argued over. It is not my problem.
785. Is there not any way of doing it to
make it compulsory on companies to actually pay into a fund which
would then ensure that the amounts of money that you need are
(Mr Gamble) It is called a tax take, is it not?
786. I did not know those companies paid
(Mr Gamble) Oh, they do.
787. At the end of the day somebody has
got to pay it. Insurance companies take it out to insure against
risk, okay it is an increased risk, could we not argue that taxpayers'
money should not be used to basically subsidise what is a risk
to the business? Should they not foot that bill and a way to do
that would be to build up a fund and make sure that everybody
contributed rather than just some and make it compulsory for them
to contribute into a fund, not the general taxation, specifically
for covering this type of eventuality?
(Mr Gamble) It is another possibility, certainly not
a very popular one but it is certainly another way of doing it.
(Mr Sharp) If you are in the City of London you would
pay a different premium from those in Leeds unless our friend
over here was targeting Leeds presumably.
(Mr Gamble) My members who have got property in London,
you can be very certain that they are paying premiums for Pool
Re but for those people who have got quarries in different parts
of the country they would not bother to take out terrorism insurance,
they would not see the need for it, so those people would be very
unhappy at suddenly being faced with a tax for Pool Re.
788. That is a silly argument surely because
they would not do that, would they? If it was a bank, for example,
or a similar facility in Leeds or, of all places, Walsall, you
could make them.
(Mr Gamble) They certainly do. After all, after the
Manchester bomb there was a lot paid out on that occasion.
789. Do local authorities not take out terrorism
insurance now in terms of covering their buildings?
(Mr Gamble) Yes.
790. Surely to ensure there was money there
available and to make it more fair for people compulsion would
be a better way than leaving it to the market with the brilliant
proviso that the poor old taxpayer picks up the bill at the end
of the day?
(Mr Gamble) It really is, as you say, the size of
the bill. Normally the companies would be able to accommodate
the losses but if the losses go above £10 billion I am afraid
that everyone gets sucked into it, including the taxpayer.
791. Should the insurance industry not be
insuring against this? That is what I find difficult about the
insurance industry, it always bleats at the end of the day when
the thing happens and they have to pay out on insurance premiums.
(Mr Gamble) I would agree with you, it is a real pain
in the neck that they suddenly withdraw this, particularly as
they did with the airlines with seven days' notice, they withdrew
the cover and therefore the Treasury had to step in and they did
a very good job on that occasion.
(Mr Sharp) It is very interesting to note that the
business report on television this morning was talking about Lloyd's
were going to declare their profits for last year, or their losses
in fact, and it is about £3.1 billion. The interesting thing
is there is a lot more investment coming into the insurance sector
at the moment because the premiums are higher.
(Mr Gamble) That is the premium for standard insurance,
you cannot regrettably get the insurance for terrorism because
the potential consequence is so large.
792. Could I move on to the role of the
central government and particularly the Civil Contingencies Secretariat.
What role should central government be playing? At the moment
do you think it is doing enough to help? What improvements have
you seen in the performance of the CCS since it was established?
(Mr Gamble) I have had no experience.
(Mr Wood) Until you talked about the CCS today I was
not even aware of their existence so I do not think they are very
good at marketing themselves across the private sector.
(Mr Sharp) I would agree with that entirely. They
themselves recognise that and tomorrow I will be agreeing to go
on a road show with them in July and in September to try and go
out to promote business continuity, resilience, etc.
793. Mike Grannatt, who is the Head of the
CCS, told us on 18 January "in London . . . there has been
a great coming together of organisations involved in London's
resilienceboth the local government arrangements, central
government arrangements, private organisations, utilities(which)
has shown that people have an appetite now in particular to be
engaged in this." I just took it for granted so I am surprised
you do not know.
(Mr Wood) I echo his sentiments that we have a great
desire to come together. Certainly I am not aware of it and I
am not aware of any other part of my organisation that is aware
of it. I am sure that had it been I would have been aware of that.
794. In terms of the bank how big are you
in terms of the pecking order?
(Mr Wood) We are an investment bank. We are the third
European investment bank.
795. And you have not heard?
(Mr Wood) No.
(Mr Sharp) I know that the awareness of their activities
is very low.
796. What intrigues me is this idea of a
road show for the Secretariat. Having seen the personnel involved
I am not sure that will be very exciting.
(Mr Sharp) There is an issue and that is are they
going to be taking a real lead or are they going to be a postbox
for disasters and I have a feeling that it is going to be the
797. Do you think that the principle of
an elite Government Department for each civil emergency, for example,
is still appropriate?
(Mr Sharp) Let us take a nuclear accident. If the
nuclear accident is fuel being transported it becomes a Ministry
of Transport responsibility, if it is at a site that is a utility
then it is another department, if it is actually a military situation
it is another department.
(Mr Wood) There is an overriding nuclear accident
response organisation framework to deal with those sorts of activities,
so I think that sort of level of activity is centrally controlled
by Government adequately and I would feel comfortable about that.
I think that there does need to be a lead department that has
a clear directive and a clear mandate to try and co-ordinate that
resilience and it does not just rest around London, it goes right
the way across the length and breadth of the UK.
798. The lead Government department, would
that be a principal lead Government department for every type
of emergency or a department for various types of emergency?
(Mr Wood) I think there is an overlap between both.
It is difficult to have all the expertise in one basket dealing
with it but across the issues of terrorism and the sort of disaster
recovery type activity we are talking about here, yes, there could
be one lead Government department using and pulling and drawing
together the other experiences of Government, both central and
local government. Where that naturally fits I do not know off
the top of my head. Going on to the other issues about where Government
needs to engage industry, we do need to have better circulation
and making available timely threat assessment information. I think
there is a huge amount of experience in both the defence sector
and the Ministry of Defence about dealing with counter-terrorism
and counter-terrorism measures and they have got huge experience
how to do that, they can share that with industry. Having a national
level of alerts is there in essence but is not widely shared with
the community, again because of this intelligence trust and thwart.
There needs to be an acceptable level. If it is adequate for the
defence sector and the defence industries and List X companies
then there is no reason in my mind why it cannot be shared with
other parts of the commercial sector. I do not accept that there
is a difference between the two.
799. You said provocatively that you did
not think that the CCS would be anything other than a postbox.
What has led you to that rather gloomy
(Mr Sharp) Discussions with the CCS which say "we
will determine which is the lead department and that lead department
will take the crisis".