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F Terrorism

Following 9/11 and its profound impact on the insurance and reinsurance market, the following clause
was introduced in the London Market to exclude terrorism in reinsurance policies:

Notwithstanding any provision to the contrary within this agreement or any endorsement thereto, this
reinsurance agreement does not cover any loss, damage or expense of whatsoever nature directly or
indirectly caused by, resulting from, happening through or in connection with any act of terrorism,
regardless of any other cause contributing concurrently or in any other sequence to the loss, damage or
expense.
For the purpose of this exclusion, terrorism means an act of violence or an act dangerous to human life,
tangible or intangible property or infrastructure with the intention or effect to influence any government or
to put the public or any section of the public in fear.
In any action suit or other proceedings where the reinsurer alleges that by reason of this definition a loss,
damage or expense is not covered by this reinsurance agreement, the burden of proving that such loss,
damage or expense is covered shall be upon the reinsured.

This reflects a similar clause that has also been added to direct insurance policies.
In the past, terrorism was also recognised as part of a risk and included in the underwriting
considerations in the various insurance and reinsurance lines of business. This was mainly related to
cases in which terrorists were deemed responsible for arson, explosions or murder of individuals or
several persons.

Activity
When Bishopsgate (in the City of London) was attacked by terrorists in 1993, the explosion damaged 278,000
square metres of space whilst an estimated £300m worth of damage was inflicted on the buildings and businesses
in the surrounding area. See what you can find out about the attack at nearby St Mary Axe that occurred the year
before.

Following 9/11, much higher figures have been put on possible loss impacts from terrorist attacks. The Reference copy for CII Face to Face Training
potential for greater loss frequency of such major losses has also increased. New criteria regarding
safety obligations and contributory negligence apply in connection with the liability of owners of means
of transport, production plants and buildings. Of particular importance to underwriting are loss
potentials for very large losses with the possibility of line of business clashes and policy accumulations.

F1 International perspectives on terrorism

Unsurprisingly, the approach that a country takes to the provision of terrorism cover varies according to
the territory in question and the perceived vulnerability its people and its property have to the activities
of terrorists.

F1A UK
Pool Reinsurance Company Ltd (Pool Re) was formed in 1993 in response to the succession of attacks by
Pool Re was formed
in 1993 Irish terrorists. A mutual, Pool Re provides reinsurance capacity to the UK commercial property market
with the Government standing behind it as the ‘reinsurer of last resort’. In 2003, Pool Re’s cover changed
from a facultative approach to treaty cover with a per event retention.
9 The scheme uses the definition of an Act of Terrorism contained in the Reinsurance (Acts of Terrorism)
Chapter Act 1993: “ …acts of persons acting on behalf of, or in connection with, any organisation which carries

out activities directed towards the overthrowing or influencing, by force or violence, of Her Majesty’s
government in the United Kingdom or any other government de jure or de facto.”
The terrorism cover provided by Pool Re members must be issued as part of a policy which covers losses
resulting from damage to commercial property. Terms and conditions that apply to the general cover will
also apply to the terrorism cover. Equally, monetary limits that appear in the general policy also apply to
the terrorism cover.
Be aware
In the event that the general commercial property policy states that losses below a certain amount cannot be
recovered from the insurer, then the same deductible applies to the terrorism cover.