THE Catholic Church in Scotland was accused yesterday of having a secret insurance fund set up on a Channel island specifically to pay victims of sexual abuse from priests.

The Catholic National Mutual, based in Guernsey, has provided cover in return for extra premiums and handled compensation claims for physical and sexual abuse since the early 1990s, BBC Radio Scotland said.

In a day of confusion, the allegations sparked furious denials from the Catholic Church in Scotland and the insurance company which underwrites it.

However, the Catholic Church in England appeared to confirm the claims.

The Scottish Church's spokesman, Father Tom Connelly, threatened to take legal action against the BBC and said the policy was of a standard type and no different from that carried by any other employer.

His claims were backed by the Royal Sun Alliance Group, which handles the church's public and employer liability insurances through the Catholic National Mutual Insurance Company.

It said that there was no specific policy dealing with the consequences of abuse and no mention of it anywhere in the policies. Spokesman Mr Tony Sault said that, given a situation where a priest was found to have abused someone and where it had been legally proven that the church had been negligent in failing to stop it, then the insurance policy would provide cover up to a certain prearranged level.

He said he knew nothing of claims that the church had paid extra premiums for abuse cover.

Mr Nicholas Coote, of the Catholic Bishops' Conference in England, appeared on national television to confirm the existence of the insurance fund.

His actions were explained by Father Connelly as the result of confusion in the church's London office over a statement sent from Scotland. ``We have no fund for sex abuse cases, but the mutual insurance cover we have does not exclude it.

``There is nothing excluded in the policy. That is a big difference from saying that we have a secret fund,'' said Father Connelly.

Cardinal Thomas Winning of Glasgow and three other Scottish bishops were said to be shareholders in the company, along with 18 other dioceses in England and Wales.

In response to criticism from the church, BBC Scotland said later: ``We stand by our story 100%.

``In the early 1990s, Catholic National Mutual offered specific liability cover to shareholders on payment of additional premiums, specifically to cover physical and sex abuse claims.

``Our story clearly indicates that the Catholic church is insured for this contingency.''

A spokesman added: ``Effectively, a fund does exist - it is a fund triggered by a policy against which a claim is made.''