Within one minute on July 7, the first full day of the 31st G8 summit in Scotland, a series of three bomb explosions struck London's public transportation system during the morning rush hour. An hour later, a fourth bomb exploded on a city bus.

The incidents, which killed at least 54 people and left 700 injured, are the deadliest bombings in London since the Blitz during World War II, and the deadliest terrorist attack since the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland. In addition, the city's transport and telecommunication infrastructure was severely disrupted for nearly a day.

Investigators have identified four men, three from West Yorkshire, who are thought to have carried out the attacks. Another man is reported to have been arrested in connection with at least one of the suspects. The bombings are believed to have been planned by Islamic terrorist organizations based in the United Kingdom. The attacks occurred two days after the trial of radical cleric Abu Hamza began in London.

Although officials with Transport for London did not initially release any damage estimates, Robert Hartwig, vice president and chief economist with the Insurance Information Institute, estimated the figure at $100 million. The transit system is insured through a captive program, London Transport Insurance, and the London Underground operates the trains and provides staffing. A private sector consortium, Metronet and Tube Lines, maintains the infrastructure and tunnels. Claims have been filed under the transportation department's insurance, with the excess property damage policy indemnified by the London Underground.

Because the bombings are acts of terrorism, they fall under the United Kingdom's public-private reinsurance arrangement, Pool Re, established in 1993 in response to IRA attacks. Other losses, such as business interruption, would not be covered by Pool Re, and would have to be absorbed by Transport for London.

Contingent losses also may arise, said Chris James, an associate director in process management for Aon in London. These would include such things as cancellations of concerts on the recommendation of the police.

If the blasts were confirmed to be terrorist attacks, insurers would be liable for $131 million per attack, capped at twice that figure if other attacks occur in the same year. Pool Re covers the remaining cost of the claim up to $3.5 billion pounds; the UK Treasury is expected to step in to pay the rest.

Although the losses are light in terms of property damage, trying to produce a model to estimate those damages is very difficult, according to Andrew Coburn, director of terrorism research in London for Risk Management Solutions. A lot of information needed to perform modeling estimates is not available currently, he noted.

The incident came as no great surprise, however. On its ranking of nations for incidents of terrorism, RMS had placed Great Britain fourth. The United States is rated number one, followed by Iraq and Afghanistan. “The threat of an attack on London transport was always one of the more likely scenarios under consideration,” Coburn said. “It was designed to cause the maximum amount of casualties, fear, economic disruption, and media attention, while using comparatively small-scale attack devices.”

If there is one positive note, Coburn believes, it is the size of the attack. “We may well see more small-scale operations like this, which, in a way, is good for insurers, because it limits potential loss,” he said. “It's the much larger events that give us more concern.”

The attacks have underscored the continued threat of terrorism globally, according to Aaron Davis, vice president of property syndication at Aon Risk Services. “The terrorist bombings in London demonstrate that the risk of terrorism will exist, regardless of whether there is federal backstop or not,” he said. “The industry will need to craft a solution regardless of TRIA.”

The insurance industry could do more to find a market solution to terrorism risk. “In the absence of TRIA, we see a limited market for terrorism cover,” he said. “We would like to see some sort of solution. It is incumbent on the insurance industry to come up with that solution.”