German authorities have decided to extend their support for the nation's terrorism insurance pool scheme by a further two years in response to the devastating series of bomb explosions that hit London.

The finance ministry of the German government has confirmed that state backing for the insurance scheme, which guarantees $12 billion worth of coverage to policy holder per annum, will be extended by 24 months past its original expiry date due at the end of this year.

The Extremus Versicherungs AG was established in the wake of the 2001 terrorist attacks on the US. The scheme, which will now cover policy holders with government support until the end of 2007, offers coverage for damage to property and for business disruption if there is a terrorist attack on Germany.

The insurance pool is made up of 16 insurers including Allianz AG and Munich Re and is effectively underwritten by the German government.