Understanding Terrorism Insurance and Pool Re: What Property Owners Need to Know

Terrorism isn’t something any property owner wants to think about, but in a world where risks are evolving, it's essential to understand how your insurance policy responds to this type of threat.

Many commercial and residential property owners are unaware that standard insurance policies typically exclude terrorism coverage. In the unfortunate event of a terrorist attack causing damage to your property or disrupting your business, the financial consequences could be severe unless you have appropriate protection in place.

What is Terrorism Insurance?

Terrorism insurance protects property owners against losses resulting from terrorist acts. This could include physical damage to buildings, loss of rental income, or business interruption. While not always legally required, some mortgage lenders make this a mandatory requirement to protect their interest in the property.

Without this cover, you're likely to face significant out-of-pocket costs, as insurers may not cover claims arising from terrorism-related incidents.

Pool Re: The UK's Backstop for Terrorism Risk

To ensure terrorism insurance is available and affordable, the UK government and insurance industry came together to create Pool Re, a government-backed reinsurance scheme.

What is Pool Re?

Pool Re (Pool Reinsurance Company Ltd) was established in 1993 in response to the IRA bombings, which made terrorism cover difficult to obtain. The scheme allows insurers to offer terrorism cover, knowing they can recover claims through Pool Re if a large-scale event occurs.

Key Benefits of Pool Re Cover:

• Broad coverage for acts of terrorism, including bombings, chemical attacks, and cyber-triggered physical damage

• Available to businesses of all sizes across the UK (excluding Northern Ireland)

• Affordable pricing backed by government support

• Peace of mind that you're financially protected from a low-frequency but high-impact risk

👉 For more details, visit www.poolre.co.uk

Other Terrorism Insurance Providers (e.g., Lloyd’s Market)

In addition to Pool Re, terrorism cover is also available through private market insurers, many of whom operate through the Lloyd’s of London marketplace. These providers offer standalone terrorism policies that may be a suitable alternative depending on your specific needs.

Key Differences from Pool Re:

• Typically Lower Premiums: Private market options are often more competitively priced than Pool Re, although they may come with higher excesses (e.g. £1,000 or more).

• Limited Scope: These policies may exclude certain perils, such as chemical, biological, radiological, or nuclear (CBRN) attacks, or non-damage business interruption caused by a threat rather than physical destruction.

• No Government Backing: Unlike Pool Re, these providers rely solely on their own reserves or reinsurance arrangements to pay claims, meaning there’s no government safety net in the event of a large-scale loss.

• Greater Customisation: These policies can often be tailored to specific risks or geographic locations, offering more flexibility, particularly beneficial for unique or non-standard property portfolios.

👉 A leading example is CFC Underwriting, which offers flexible cover options outside of the Pool Re scheme.

As always, it’s essential to review the specific policy wording to ensure your property is protected against the full range of terrorism-related risks relevant to your business.

Mortgage Lenders and Terrorism Cover

If you’ve taken out a mortgage on a commercial property, check the fine print. Many lenders require terrorism insurance as part of their terms and conditions. Failing to have it in place could lead to a breach of your mortgage agreement and financial risk.

Is Terrorism Insurance Worth It?

While the likelihood of a terrorist event is low, the impact can be catastrophic. Adding terrorism coverage to your policy is typically straightforward and cost-effective, and for many property owners, it’s a smart, responsible decision.

Our team at Eggar Forrester Insurance can help you assess whether you need terrorism insurance, review your mortgage obligations, and explain how Pool Re applies to your policy.

Need a review of your current cover or want to understand if Pool Re applies to your property?

Get in touch with our expert team; we’re here to help.