Category: Other specialty · Reviewed by Matt Bartlett, Director · Founder · Last reviewed 2026-06-05
Terrorism insurance covers physical damage to property and consequential business interruption arising from acts of terrorism; in the UK, terrorism cover is provided principally through Pool Re — the mutual reinsurance scheme established under the Reinsurance (Acts of Terrorism) Act 1993 — supplemented by the private terrorism insurance market for specific exposures and for risks outside the Pool Re scheme.
Category: Other specialty Also known as: terrorism cover, terrorism risk insurance, T3 cover First codified: Reinsurance (Acts of Terrorism) Act 1993; Pool Reinsurance Company established 1993 Related legislation: Reinsurance (Acts of Terrorism) Act 1993 [1]; Terrorism Act 2000 [2]; Counter-Terrorism Act 2008 [3]
Terrorism insurance covers the financial loss arising from acts of terrorism. The class emerged in its modern UK form following the IRA mainland campaign of the late 1980s and early 1990s, in which a series of major commercial terrorism events (the 1992 Baltic Exchange bombing, the 1993 Bishopsgate bombing) generated insurance losses that the commercial market was unable or unwilling to cover. The UK government response was the establishment of Pool Re (Pool Reinsurance Company Limited) under the Reinsurance (Acts of Terrorism) Act 1993, providing a mutual reinsurance scheme with HM Treasury backstop [4][5].
The principal sub-classes of modern UK terrorism insurance are:
Pool Re commercial property terrorism cover: the dominant cover for UK commercial property, provided through Pool Re member insurers and reinsured into the Pool Re scheme.
Private market terrorism cover: standalone terrorism cover from Lloyd’s syndicates and specialist non-Pool Re insurers, used principally for risks outside the Pool Re scheme (residential property, certain commercial exposures, international exposures).
Specialty terrorism extensions: extensions to property all risks, marine, aviation and other commercial covers responding to terrorism-related events affecting the underlying class.
Liability terrorism extensions: third-party liability cover for terrorism-related liabilities.
Cyber terrorism cover: emerging area addressing cyber attacks that meet relevant definitions of terrorism, often with complex interactions with cyber war exclusions [4][5].
The class is conceptually distinct from kidnap, ransom and extortion insurance (which addresses K&R events including those carried out for political motives), from war risk aviation (which addresses war and political risks affecting aircraft) and from political risk insurance (which addresses investor-state political risks). The boundaries between these classes can be contested in coverage disputes [4][5].
The Reinsurance (Acts of Terrorism) Act 1993 is the principal UK statutory framework for terrorism insurance. The Act empowers HM Treasury to enter into reinsurance arrangements covering acts of terrorism and is the legal foundation for the Pool Re scheme. The Act has been amended several times to expand the Pool Re cover and to address emerging concerns including chemical, biological, radiological and nuclear (CBRN) terrorism, cyber terrorism and material damage from acts of terrorism affecting railways [1][6].
The Terrorism Act 2000 (as amended by subsequent legislation) defines ‘terrorism’ for UK legal purposes. Section 1 of the 2000 Act defines terrorism as the use or threat of action that involves serious violence against a person, serious damage to property, endangering life, creating risk to health or safety of the public or seriously interfering with electronic systems, where the use or threat is designed to influence the government or intimidate the public, and is made for the purpose of advancing a political, religious, racial or ideological cause [2][7].
The Counter-Terrorism Act 2008 (and subsequent counter-terrorism legislation including the Counter-Terrorism and Border Security Act 2019 and the Online Safety Act 2023) expand the legal framework for counter-terrorism. The Sanctions and Anti-Money Laundering Act 2018 and the Proscribed Organisations regime under the Terrorism Act 2000 affect the lawfulness of payments connected to proscribed organisations [3][8].
The definition of an ‘act of terrorism’ for insurance cover purposes is typically aligned with the statutory definition but with specific policy modifications. Where the cover is reinsured into Pool Re, the Pool Re statutory definition applies and HM Treasury (acting on advice from the Pool Re board and external consultants) certifies events as ‘acts of terrorism’ qualifying for Pool Re cover. The certification process is critical to claims handling and has been a focus of significant attention following major events including the 2017 Westminster Bridge, Manchester Arena and London Bridge attacks [9].
The Insurance Act 2015 governs the duty of fair presentation and warranty rules for terrorism insurance placements. Disclosure of property locations, asset values, prior incidents and security arrangements is important [10].
A UK commercial property owner typically arranges terrorism cover as an endorsement or extension to its main property programme. The endorsement provides cover for terrorism-related damage and consequential losses, with the primary insurer ceding the terrorism exposure to the Pool Re scheme (where the insurer is a Pool Re member) [4][5].
Pool Re cover operates on a ‘mandatory ceding’ basis for member insurers — the insurers writing UK commercial property terrorism cover must cede the risk to Pool Re. The arrangement provides Pool Re with a substantial pool of premium income and creates the mutual capacity for the very large terrorism losses that the commercial market alone could not absorb. The HM Treasury backstop sits behind Pool Re’s own resources and provides ultimate financial security [4][5].
For risks outside the Pool Re scope (residential property, certain commercial exposures with insurance arranged outside the UK, international exposures), private market terrorism cover from Lloyd’s and other specialist insurers is the principal source. Limits and pricing in the private market reflect the specific risk profile and the cyclical state of the market [4][5].
Premium for terrorism cover varies enormously by exposure. Office buildings in central London commercial districts attract substantial terrorism premium loadings reflecting the historical and ongoing terrorism risk in major UK cities. Industrial properties in less exposed locations attract much lower loadings. Specific ‘iconic’ targets (transport infrastructure, government buildings, financial sector landmarks, major sports venues) face the highest loadings [4][5].
Claims handling for terrorism events involves coordination between the primary insurer, Pool Re (for Pool Re-ceded risks), HM Treasury (for certification), the police and security services (in the immediate response), the loss adjusters, and the local authority (for emergency response support). Major terrorism events affecting commercial property generate complex insurance and recovery processes that can run for many years [4][5].
Pool Re commercial property terrorism: dominant cover for UK commercial property.
Private market terrorism: cover outside the Pool Re scheme.
Specialty terrorism extensions: extensions to other commercial covers (marine, aviation, energy).
Cyber terrorism: emerging cover for cyber attacks meeting terrorism definitions.
CBRN terrorism: cover for chemical, biological, radiological and nuclear terrorism (significantly expanded in Pool Re cover scope in recent years).
Acts of war exclusion: traditional exclusion for war and warlike operations, with terrorism cover designed to fall within the war exclusion gap.
Liability terrorism extensions: third-party liability cover for terrorism-related liabilities.
Personal accident terrorism: personal accident cover for terrorism-related personal injury.
Specie terrorism: cover for high-value cargo and stored valuables (artwork, bullion, jewellery) against terrorism damage.
Business interruption only terrorism: cover for BI losses arising from terrorism affecting third party premises (e.g. supplier or customer premises).
A UK commercial property owner with a portfolio of office buildings totalling £800m of insured property value in central London arranges terrorism cover as an extension to its main property all risks programme. The cover is ceded to Pool Re by the primary insurer. Annual terrorism premium across the portfolio is approximately £180,000, reflecting the central London exposure. During the policy year, no terrorism event occurs and the cover runs to natural renewal. Had a major terrorism event occurred causing significant damage to one of the buildings, the primary insurer would have responded to the property loss with the terrorism exposure ultimately falling on the Pool Re scheme (subject to HM Treasury certification of the event as an act of terrorism within the scheme’s coverage scope). Figures in this example are illustrative.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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