In the Track Motion window at the bottom of the timeline are checkboxes for 2D Shadow and 2D Glow. Check the 2D Glow box. A new section will open up in the parameters list for Glow. Double-click the color bar to choose white. Increase the intensity and decrease the blur to taste.
(If you don't have 2D Glow ...)
Use the Media Generator to create a solid white event. Place it on the timeline above the background video and beneath the smaller inset video. Use Track Motion to reduce it to a size slightly larger than the smaller video and position it behind the smaller video.
Another way is to go to VideoFx where there is a Border effect that you can add to the PIP event. You have the option of specifying border color, size and type (solid, beveled or blurred).
There is a project on the VASST site that shows exactly this, except the border is blue, not white, if you want to download it and dissect it or replace the media with your own.