British police are investigating the background of a mentally troubled Iraqi-Syrian convert to Christianity who died in a botched bomb attack in Liverpool, according to multiple reports on Tuesday.

Counter-terrorism police in northwest England released four men held for questioning over the incident, which came seconds before Britain marked Remembrance Sunday.

"Police have been satisfied with their account and they have been released," security minister Damian Hinds told ITV News on Tuesday.

Emad Al Swealmeen, 32, has been named by police as the would-be bomber whose crude improvised device went off in the back of a taxi outside a Liverpool hospital.

He was killed, while the quick-thinking taxi driver escaped with minor injuries after locking Al Swealmeen inside his cab.

The government increased its terrorism threat assessment to "severe" -- the second-highest level, meaning an attack is highly likely -- following the second terror incident in a month after Conservative MP David Amess was stabbed to death.

Police gave few other details about the Liverpool suspect. Hinds said he could not comment on the background of the suspect because of the investigation.

But reports by newspapers and broadcasters quoting unidentified security sources said Al Swealmeen was a failed asylum seeker of Iraqi and Syrian descent with a history of mental-health problems.

He was taken in by Elizabeth and Malcolm Hitchcott, a Christian volunteer couple in Liverpool, for eight months from 2017 as his appeal for refugee status played out.

Elizabeth Hitchcott told the BBC she felt "just so sad" and "very shocked" by Sunday's incident, adding: "We just loved him, he was a lovely guy."

Malcolm Hitchcott said Al Swealmeen spent time in a mental institution after being arrested with a knife in an incident in central Liverpool.

But otherwise "he was a very quiet fellow" who converted to Christianity and was baptised in Liverpool Cathedral, having rejected Islam, Hitchcott told ITV.

The same cathedral was the venue of Liverpool's Remembrance Sunday service attended by some 2,000 people to honour Britain's military veterans and war dead.

'Islamist plot'

The Times newspaper reported that an "Islamist plot was a significant line of inquiry" for counter-terrorism police and MI5 investigators, pointing to the cathedral or Liverpool Women's Hospital as possible targets.

It said the improvised device contained TATP, the same explosive favoured by the Islamic State group that was used in the 2015 Paris attacks and the Manchester Arena bombing in 2017.

Prime Minister Boris Johnson said late Monday that the Liverpool attack was a "stark reminder of the need for us all to remain utterly vigilant".

"But what yesterday (Sunday) showed us all is that the British people will never be cowed by terrorism. We will never give in to those who seek to divide us with senseless acts," Johnson said.

The blast and fireball sent thick smoke into the air outside the Liverpool hospital as Britain was about to fall silent in tribute to its armed forces.

There was widespread praise for the "heroic" taxi driver, named locally as David Perry, following reports he locked Al Swealmeen inside the cab after growing suspicious about his intentions.

Perry was treated in hospital but released Monday, according to his wife, who posted on Facebook that it was "an utter miracle" that he survived.

Johnson, who called a meeting of a government emergency body, said it appeared the driver had behaved "with incredible presence of mind and bravery".

Meanwhile, Ali Harbi Ali, a 25-year-old man accused of murdering Amess last month as the MP met constituents in Leigh-on-Sea, east of London, will go on trial next year.

Prosecutors have said the killing "has a terrorist connection" with "religious and ideological motivations".