Category: Clauses & wordings · Reviewed by Mark Fox, Broker · Renewals · Last reviewed June 2026
A policy clause that removes cover for loss, damage, cost or liability directly or indirectly caused by, contributed to by, or arising out of acts of terrorism, leaving the insured to seek separate terrorism cover (typically via Pool Re or the open market).
A terrorism exclusion is a contractual provision excluding insured perils where the loss is caused, contributed to or arises in connection with an act of terrorism. The clause appears in virtually all UK commercial property, business interruption, marine, aviation, engineering, motor fleet and liability policies, and in many personal lines wordings. Following the IRA bombings at the Baltic Exchange (1992) and Bishopsgate (1993), the London market withdrew terrorism cover from commercial property risks, and Parliament responded with the Reinsurance (Acts of Terrorism) Act 1993, establishing Pool Reinsurance Company Limited (Pool Re) as a mutual reinsurer backed by HM Treasury.
The exclusion typically operates on a “directly or indirectly caused by, resulting from or in connection with” basis, which is broader than proximate cause and captures losses where terrorism is a contributory factor rather than the sole cause. It is often paired with a “regardless of any other cause or event contributing concurrently” wording, designed to defeat arguments based on Wayne Tank & Pump Co Ltd v Employers Liability Assurance Corp [1974] QB 57 about concurrent causes.
For commercial property risks, cover may be reinstated by purchasing a Pool Re-backed extension through a Pool Re member insurer. Since the Counter-Terrorism and Security Act 2015 amendments, Pool Re cover has extended to non-damage business interruption following an act of terrorism and to cyber-triggered terrorism. Standalone terrorism cover is also available via Lloyd’s syndicates and specialist markets such as Hiscox, Beazley and Talbot.
Personal lines policies (household, motor) generally include limited terrorism cover for property damage caused by fire and explosion, reflecting historic ABI guidance, though this varies by insurer and is excluded in higher-aggregation exposures such as commercial landlords.
The statutory definition relied on by most UK wordings is found in section 1 of the Terrorism Act 2000, which defines terrorism as the use or threat of action where the action is designed to influence the government or an international governmental organisation or to intimidate the public or a section of the public, and the use or threat is made for the purpose of advancing a political, religious, racial or ideological cause. Section 1(2) lists the qualifying actions, including serious violence against a person, serious damage to property, endangering life, creating a serious risk to public health or safety, and serious interference with or disruption of an electronic system.
The Reinsurance (Acts of Terrorism) Act 1993 enables HM Treasury to enter into reinsurance arrangements with Pool Re. Pool Re’s own definition of an “Act of Terrorism” is set out in its scheme rules and is broadly aligned with the Terrorism Act 2000 but historically required HM Treasury certification of an event as terrorism — a requirement that has been replaced by an “all risks” approach for member insurers since 2018, removing the prior gap for events not formally certified.
In FCA v Arch Insurance (UK) Ltd [2021] UKSC 1, the Supreme Court’s analysis of causation in concurrent-cause settings reinforced that broad “arising out of” or “in connection with” wordings cast a wide net. The judgment is relied on by insurers to defend the breadth of terrorism exclusion drafting.
The Lloyd’s Market Association maintains a suite of model wordings, including LMA3030, LMA3092 and the NMA2918 (UK only) Terrorism Exclusion Endorsement. The Financial Conduct Authority’s Insurance Conduct of Business Sourcebook (ICOBS 6.1) requires insurers and brokers to draw attention to significant exclusions; given the catastrophic potential of an uninsured terrorism loss, terrorism exclusions are routinely treated as significant for ICOBS disclosure purposes.
When a loss occurs, the insurer will consider whether the proximate or contributing cause falls within the policy definition of terrorism. The analysis turns on three elements: was there a use or threat of action of the type listed in section 1(2) Terrorism Act 2000; was it designed to influence government or intimidate the public; and was it for a political, religious, racial or ideological purpose. Where the answer is yes to all three, the exclusion bites.
Practical disputes commonly arise over:
Brokers should examine the trigger wording carefully. Some clauses require an act “certified by HM Treasury” — a much narrower trigger than acts meeting the section 1 definition. Where a Pool Re-backed extension is bought, the certification mechanism has been replaced by member-insurer determination, but legacy wordings may still refer to HM Treasury certification.
A central London restaurant chain holds a commercial combined policy with NMA2918 terrorism exclusion and a Pool Re-backed extension purchased through its insurer. In March 2017, the Westminster Bridge attack causes a police cordon for 36 hours over part of Whitehall. One of the chain’s restaurants, 150 metres from the cordon, suffers no physical damage but loses three days’ trading. The insured’s gross profit loss is GBP 42,000.
Under the base policy, business interruption requires physical damage to insured property — there is none. The terrorism exclusion bites on any extension that might otherwise respond. However, the Pool Re extension purchased includes the 2018-introduced non-damage BI cover for denial of access following a certified terrorism incident, subject to a GBP 5,000 deductible and a 24-hour waiting period.
The insurer confirms the incident is treated as terrorism for Pool Re purposes, applies the waiting period to the first 24 hours, and settles GBP 23,000 (GBP 42,000 x 2/3 to reflect the 48 hours of compensable loss, less the GBP 5,000 deductible and a further proportional adjustment for the waiting period). Without the Pool Re extension, the loss would have been uninsured in full — illustrating why brokers should actively recommend terrorism cover for any business with material concentration of asset value or revenue in city-centre or high-footfall locations.
By Matt Bartlett, Director, on 2026-06-11. Next review: 2026-12-11.
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This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-11. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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